US Initial Jobless Claims Fell More than Expected in Latest Week

Location: Toronto
Author: RBC Financial Group Economics Department
Date: Friday, February 4, 2011

02/03/11 - Initial unemployment insurance claims fell 42,000 to 415,000 for the week ending January 29, 2011, reversing most of the previous week’s surprising 54,000 jump to a revised 457,000 level (initially reported as 454,000). The improvement in the latest week was larger than market expectations for claims to fall to a 420,000 level. The four-week moving average of initial claims, which normally provides a better indication of the underlying trend in labour markets, inched up to 430,500 from 429,500 the prior week. Continuing claims (for the week ending January 22, 2011) dropped 84,000 to 3,925,000 from 4,009,000 last week.

The dip in initial claims in the latest week supports the view that most of the surprising increase in the previous week was likely due to a combination of bad weather and difficulties seasonally adjusting the data rather than a break in the improving trend in recent months. The four-week moving average of initial claims, which better controls for these distortions, inched up but remained below the average 438,000 level for the previous three months and is still consistent with an underlying improvement in labour markets going forward. Today’s report will likely have more of an effect on expectations for the February payroll employment report than tomorrow’s report for January, given that the payroll survey was conducted earlier in the month. With that said, the drop in the four-week moving average of initial claims to 413,000 in the January survey week from 426,000 in December is consistent with our expectation that employment growth improved modestly in January. We expect a 141,000 gain in private employment in the month following a 113,000 gain in December. Hiring at the state and local government level will likely remain weak, although we do not expect this to prevent an improvement in overall payroll employment to 136,000 in January from 103,000 in December.

Information contained in this report has been prepared by the Economics Department of RBC Financial Group based on information obtained from sources considered to be reliable. While every effort has been made to ensure accuracy and completeness, RBC Financial Group makes no such representation or warranty, express or implied. This report is for information purposes only and does not constitute an offer to sell or a solicitation to buy securities.

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