December 31, 2008 / 1:38 PM / 11 years ago

Jobless claims drop by much more than expected

WASHINGTON (Reuters) - The number of U.S. workers filing new claims for jobless benefits slumped 94,000 last week, government data on Wednesday showed, but seasonal factors were likely behind this unexpectedly large decline with the labor market remaining very soft.

Gary Pitts (L) and Jen Dix (R) apply for a job with Fair Point Communications recruiter David Bausch (C) at a job fair organized by the New Hampshire Employment Security agency in Salem, New Hampshire December 17, 2008. REUTERS/Brian Snyder

Initial claims for state unemployment insurance benefits fell to a seasonally adjusted 492,000 in the week ended Dec 27 from an unrevised 586,000 the prior week, the Labor Department said. It was the lowest reading for initial claims since the week ended November 1, 2008, and the steepest decline since 1992.

Prices on U.S. government bond extended losses on the larger-than-expected drop in claims.

Analysts polled by Reuters had forecast 565,000 new claims as the country’s year-long recession continued to chill employment, and a separate reading on so-called continued claims hit a 26-year high.

A Labor Department official said the timing of the year-end holidays and volatility in factors used to seasonal adjust the data was likely to blame for the large decline in initial weekly claims, and he warned this situation could persist for several more weeks.

“The numbers seemed unbelievable but the states certified they were correct,” the Labor Department official said.

The official said all but two states and one territory reported actual numbers of claims, rather than submitting an estimate. But the fact many staff at claims offices were likely away for the Christmas vacation may have depressed the number of applications for aid that were actually processed, he said.

The four-week average of new jobless claims, a better gauge of underlying employment trends because it irons out week-to-week volatility, dropped to 552,250 from 558,000 the week before.

This measure has mounted steadily as the U.S. housing slump roiled financial markets and spread to the wider economy, forcing lay-offs as firms slash costs to offset weaker income.

The number of people remaining on the benefits roll after drawing an initial week of aid rose 140,000 to a more-than-forecast 4.506 million in the week ended December 20, the most recent week for which data is available.

This was the highest since the week ended December 4, 1982, when continued claims were 4.509 million. Analysts estimated continued claims would be 4.430 million.

Reporting by Alister Bull, Editing by Neil Stempleman

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