Jobless Claims Fall to 2-1/2 Year Low

by: Mark J. Perry


New U.S. claims for unemployment benefits unexpectedly fell last week to touch their lowest level in more than 2-1/2 years, while nonfarm productivity rose as expected in the fourth quarter. The four-week moving average of unemployment claims — a better measure of underlying trends — dropped 12,750 to 388,500 last week, the lowest since July 2008.

Claims have now held below the 400,000 threshold for a second straight week. Claims below that level are widely viewed as signaling strong jobs growth and economists believe it is only a matter of time before this is reflected in the payrolls numbers.

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The chart below shows jobless claims over a longer period, back to 2000. With the four-week average dropping consistently since the end of the recession, and now falling below 400,000 for the first time since mid-2008, jobless claims are now at a level consistent with the economic recovery period of 2002-04. The labor market is gradually stabilizing, and we can look for ongoing jobs gains this year and a gradual decrease in the jobless rate.