Jobless claims hit 9-month low

WASHINGTON Thu Oct 8, 2009 8:54am EDT

People use computers to look for work at the California Employment Development Department in San Francisco, California September 4, 2009. REUTERS/Robert Galbraith

People use computers to look for work at the California Employment Development Department in San Francisco, California September 4, 2009.

Credit: Reuters/Robert Galbraith

WASHINGTON (Reuters) - The number of U.S. workers filing new claims for jobless insurance fell more-than-expected to a nine-month low last week, data showed, suggesting the labor market was healing despite a setback in September.

Initial claims for state unemployment benefits dropped 33,000 to a seasonally adjusted 521,000 in the week ended October 3, the lowest level since early January, the Labor Department said on Thursday.

Analysts polled by Reuters had forecast new claims slipping to 540,000 last week from a previously reported 551,000. A Labor Department official said seasonal factors expected a decline in new claims at the end of a quarter and a rise at the start of a new quarter.

The U.S. stock index futures added to gains and the U.S. dollar pared losses on the stronger-than-expected data, while yields on U.S. government debt rose.

"The labor market is improving, but rather slowly," said Cary Leahey, economist at Decision Economics in New York. "Both the initial and continuing claims numbers suggest that October ought to be a better month for payrolls than September."

The claims report will help to calm fears of a deterioration in the labor market after data last week showed U.S. employers cut more jobs in September than had been anticipated by the market.

Data suggest the economy started growing in the third quarter after a recession that started in December 2007, but a persistently weak labor market is casting doubts over the strength and sustainability of that recovery.

The unemployment rate rose to 9.8 percent in September, a 26-year high. Economists reckon the Federal Reserve will probably refrain from raising interest rates, currently near zero, until the jobless rate peaks.

The four-week moving average for new claims fell 9,000 to 539,750 last week, declining for a fifth straight week. The four-week moving average is considered a better gauge of underlying trends as it irons out week-to-week volatility.

The number of people collecting long-term unemployment benefits fell 72,000 to 6.04 million in the week ended September 26, the latest week for which the data is available. That was the lowest level since late March and was below market expectations for 6.1 million. This measure has trended lower for three consecutive weeks. However, the decline could also indicate many jobless workers have exhausted their benefits.

The four-week moving average of continuing claims dropped 15,750 to 6.1 million. The insured unemployment rate, which measures the percentage of the insured labor force that is jobless, eased to 4.5 percent, the lowest since early April, from 4.6 percent in the week ended September 19.

(Reporting by Lucia Mutikani; Editing by Neil Stempleman)