US Initial Jobless Claims Fall More than Expected in Latest Week

08/26/10 - Initial unemployment insurance claims dropped an encouraging -31,000 to 473,000 for the week ending August 21, 2010, more than reversing the previous week’s 16,000 rise to a 504,000 level (initially reported as 500,000).  Expectations for today’s report were for the level of claims to dip to 490,000. 

The four-week moving average of initial claims, which normally provides a better indication of the underlying trend in labour markets, rose to 486,750 from 483,500 in the prior week, reflecting the earlier run-up in weekly claims.  Continuing claims (for the week ending August 14) dropped -62,000 to 4,456,000 from 4,518,000 last week. 

With today’s reported decline, the level of initial claims is at its lowest point in four weeks.  This result will lend some support to the argument that the level of claims has been distorted in recent weeks by the layoff of temporary census workers applying for unemployment benefits.  With that said and even accounting for these distortions, the level on a four-week moving-average basis remains uncomfortably high, at a level not seen since November 2009.

Today’s report will likely have little influence on expectations for next Friday’s employment report (September 3, 2010) because the August payroll survey was conducted earlier in the month (the payroll employment survey is conducted during the week containing the twelfth day of the month). 

We, however, expect that the run-up in claims during the first two weeks in August is consistent with the gain in private employment moderating to about 38,000 in the month from the 71,000 increase in July.  Along with an expected sizeable -116,000 drop in census workers and a -20,000 drop in state and local government, this implies about a -98,000 drop in overall employment in the month.