Last week's sharp improvement in initial unemployment claims looked remarkable, at least at first blush, as the totals reached a four-year low. But as we discussed, the sudden drop was more the result of one-time factors, instead of a terrific economic turnaround.
With that in mind, it shouldn't come as too big a surprise that the new report from the Department of Labor shows the number bouncing back to where it was -- and then some.
U.S. jobless claims jumped 34,000 last week to 386,000, unwinding a sharp drop in the prior week, amid typical summertime fluctuations in auto-industry employment, the Labor Department reported Thursday. Auto manufacturers usually schedule brief shutdowns of plants each summer to retool for new models, but the timing and size of temporary layoffs can vary. As a result, the claims report tends to be volatile in July. Economists surveyed by MarketWatch had projected claims would climb to 365,000 last week. A more accurate barometer of labor-market trends, the four-week claims average, fell 1,500 to 375,500. The four-week average reduces seasonal volatility in the weekly data.
To reiterate the point I make every Thursday morning, it's worth remembering that week-to-week results can vary widely, and it's best not to read too much significance into any one report. This is especially true this month, given the volatility in July.
In terms of metrics, when jobless claims fall below the 400,000 threshold, it's considered evidence of an improving jobs landscape, and when the number drops below 370,000, it suggests jobs are being created rather quickly. We've only managed to dip below the 370,000 threshold twice in the last 15 weeks, and we've been above 380,000 in six of the last eight weeks.
And with that, here's the chart showing weekly, initial unemployment claims going back to the beginning of 2007. (Remember, unlike the monthly jobs chart, a lower number is good news.) For context, I've added an arrow to show the point at which President Obama's Recovery Act began spending money.