Thursday, August 07, 2008

Initial Jobless Claims

The number of people filing for first time unemployment benefits held steady at recession levels in the week ending August 2nd, according to the US Department of Labor. Claims jumped 7,000, to 455,000, after an upwardly-revised gain of 45,000 last week. Economists were expecting 430,000 new claims for the week. Today's reading is the highest reading in six years.

A large portion of [the recent gains] is due to the extension of unemployment insurance benefits, and thus does not necessarily suggest a severe loosening in the labor market.

Having witnessed extremely volatile measurements in the past few weeks, it is wise to consider the four-week moving average of initial claims, which smooths out one-time factors such as bad weather or holidays. The four-week moving average was also higher, by 26,750 in the latest week, to 419,500.

Initial claims running consistently atop the 350,000 mark would signal some weakening in the labor market. Claims above 400,000 are seen by many as a signal of recession.

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