NEW YORK (Reuters) - The number of U.S. workers filing new claims for jobless benefits fell sharply last week but the decline was amplified by seasonal adjustments mainly connected with fewer-than-expected layoffs in the automotive sector, the Labor Department said on Thursday.
KEY POINTS: * Initial claims for state unemployment insurance fell 52,000 to a much lower-than-expected seasonally adjusted 565,000 in the week ended July 4 from 617,000 the prior week, the Labor Department said. * It was the lowest reading since January. Analysts polled by Reuters had forecast claims to drop to 605,000 from a previously reported 614,000. * But in a sign of ongoing employment weakness, so-called continued claims of people still on jobless aid after an initial week of benefits rose by 159,000 to a record 6.883 million in the week ending June 27, the latest for which data is available.
“There’s not much of a story here. The Department of Labor is saying that the improvement largely reflects seasonal adjustment problems rather than a fundamental improvement in labor market conditions. Although the number for this week was much better than we had expected, it doesn’t really change our view overall of the job market conditions.
“Things are looking a little bit brighter than they were earlier this year, no doubt. However, improvement toward recovery, to a rising jobs and falling unemployment rate remains far off. We’re not convinced in fact we will see positive job growth until next year.”
“The jobless headline figure was better than expected and it critically broke below the 600,000-psychological barrier. The bad thing though is that continuing claims rose to an all-time high. So there is still some weakness there. Still I think this would end up being a net positive because companies have stopped firing people and that’s the first step toward stabilizing the labor sector. The report should prove relatively positive for risk appetite and support the euro and sterling against the dollar.”
“It certainly looks good on the surface but it is probably not quite as good when you dig into the numbers. Given what happened with the auto plants where they shut down in June and opened in July, we didn’t see as many layoffs as we normally do in early July. The continuing claims number still increased and the insured unemployment rate rose.”
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“The trend is a little bit better, and I think the only thing you’d have to watch is the week that it was taken, because sometimes you do have some aberrations with that, given the holiday week. If you want to look at the trend, you’d have to look at the average, how that moves. Given the fact that we’ve had some pullback in the trend itself, that helps, especially given the fact that the labor report that we saw last week was quite disturbing for the market. You can’t just jump at the one number and say that the trend itself has changed, but I would call that encouraging.
“A lot of time when you look at what happens, especially in a short week — the seasonals are not always the clearest. If it continues to trend that way next week, when you start to see this week’s numbers, I think I’d be more optimistic that at least we’re seeing a leveling and a change in the overall pattern of claims here.”
“It’s a pretty big drop in initial claims, but there’s big potential for seasonal issues this week given the holiday. It looks like continuing claims jumped to a new high after slipping a little bit. I would expect the underlying trend is probably diminishing but it’s hard to tell from this number how much is noise because of the timing of it. Even at 565,000 the number is still consistent with ongoing job losses and further increases in unemployment, just at a slower pace than we’ve been experiencing.”
MARKET REACTION: STOCKS: U.S. stock index futures extend gains BONDS: U.S. Treasury debt prices steady at lower levels DOLLAR: U.S. dollar extends gains versus the yen