Jobless Claims Unexpectedly Drop by 18,000 to 324,000

In some good news for the economy, weekly jobless claims took a big drop. In the week ending April 27, the advance figure for seasonally adjusted initial claims was 324,000, a decrease of 18,000 from the previous week's revised figure of 342,000. These are the lowest number of claims since January 2008. Economists were expecting jobless claims to print at 345,000. The Department of Labor, when releasing Thursday's figures, did not report any special circumstances, and the distortion from the timing of the Easter holiday should have dissipated by now. Note, however, that these data fall after the “reference week” when the Bureau of Labor Statistics conducts its twin surveys for the payroll report, due on Friday. Thus, the drop in claims will not be reflected in Friday's data. However, given that decisions to dismiss workers may have been made weeks in advance, the hiring climate more generally may have improved in April. Of course, decreased layoffs do not necessarily portend increased hiring. Because the jobless claims figures bounce around from week to week, analysts often prefer to focus on the 4-week moving average. The 4-week moving average was 342,250, a decrease of 16,000 from the previous week's revised average of 358,250. The advance seasonally adjusted insured unemployment rate was 2.3 percent for the week ending April 20, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending April 20 was 3,019,000, an increase of 12,000 from the preceding week's revised level. The 4-week moving average was 3,055,500, a decrease of 18,000 from the preceding week's revised average. Many states reported fewer layoffs in a variety of industries. However, in those states that reported an increase in claims by more than 1,000 people, several states commented that the increased layoffs occurred in education. The sequester and cutbacks in federal assistance to local school districts and other educational institutions may explain why some of these employers have resorted to layoffs to close budget deficits. States reported 1,777,737 persons claiming EUC (Emergency Unemployment Compensation) benefits for the week ending April 13, a decrease of 12,579 from the prior week. There were 2,724,432 persons claiming EUC in the comparable week in 2012. These unemployed workers could face benefits cuts with the sequester limiting unemployment insurance assistance. The total number of people claiming benefits in all programs for the week ending April 13 was 4,963,449, a decrease of 108,631 from the previous week. There were 6,597,715 persons claiming benefits in all programs in the comparable week in 2012. The Fed noted Wednesday in its press release following its policy-setting meeting that “labor market conditions have shown some improvement in recent months, on balance, though unemployment remains elevated,” similar language to its press release following its meeting March 20.The Fed did not make any mention of last month's poor employment report, which showed 88,000 new jobs created, far below what we need to reduce unemployment. The Fed also inserted language that indicated the Fed could “increase or decrease” its bond purchases as “the outlook for the labor market or inflation changes.” If upcoming data are consistently positive, the Fed could consider when it might eventually end the bond-buying program. Thirty-nine states and territories reported a decrease in claims, while 14 reported an increase.The largest increases in initial claims for the week ending April 20 were in Michigan (+6,172), Massachusetts (+4,101), Connecticut (+2,452), Rhode Island (+1,427), and Nevada (+535), while the largest decreases were in California (-16,681), New York (-6,443), Pennsylvania (-3,646), Texas (-3,070), and Indiana (-1,637).