U.S. jobless claims drop to 5-year low; labor market healing

WASHINGTON Thu Jan 24, 2013 8:30am EST

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WASHINGTON Jan 24 (Reuters) - The number of Americans filing new claims for unemployment benefits unexpectedly fell to its lowest since the early days of the 2007-09 recession, a hopeful sign for the sluggish labor market.

Initial claims for state unemployment benefits fell 5,000 to a seasonally adjusted 330,000, the lowest level since January 2008, the Labor Department said on Thursday.

Claims have now fallen for two straight weeks, suggesting that if employers are concerned tax hikes enacted this year will affect consumer demand, this is not leading to more layoffs.

Analysts polled by Reuters had expected claims to rise to 355,000 last week.

Economists have cautioned about reading too deeply into this month's figures, as claims tend to be volatile around this time of the year. This is because of large swings in the model used by the department to iron out seasonal fluctuations.

A measure of labor market trends nonetheless pointed to an improvement in the labor market's health. The four-week moving average for new claims fell 8,250 to 351,750, the lowest since March 2008.

A Labor Department analyst said claims data were estimated for three states last week, but there was nothing unusual in the state level data.

Claims are now at roughly the same level they were in much of 2006 and 2007. Claims started trending higher around December 2007, the month that the country's recession began.

However, while employers have pulled back on layoffs, they have only added jobs to the economy at a lackluster pace.

Employers adding 155,000 new positions in December and the unemployment rate held steady at 7.8 percent.

Job gains averaged 153,000 jobs per month in 2012, little changed from 2011. The sluggish labor market and subdued inflation pressures appear likely to keep the Federal Reserve on its ultra easy monetary policy course.

The claims report showed the number of people still receiving benefits under regular state programs after an initial week of aid dropped 71,000 to 3.16 million in the week ended Jan. 12.

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