Seasonal Factors Drive Initial Claims to 4-Year Low

First-time claims for unemployment insurance fell 26,000 for the week ended July 6 to 350,000 â€" the lowest level since March 2008, the ""Labor Department"":http://www.dol.gov/ reported Thursday. The prior week's total was revised up to 376,000 from the originally reported 374,000. Economists surveyed by Bloomberg had expected a modest decline to 375,000 initial claims.

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Continuing claims â€" reported on a one-week lag â€" fell 14,000 to 3,304,000 from the prior week's 3,318,000, revised from the originally reported 3,306,000.

The steep drop in initial claims â€" the largest week-week decline since mid-January â€" came in a holiday shortened week, which usually affects filings. While newly unemployed individuals can file claims online even when office are closed, clerical staff is not available to process those filings and report them.

At the same time, the Labor Department which compiles the data uses a high seasonal; adjustment factor for the week ending July 6 (and week ending July 13) which serves to reduce the reported number of claims further. Seasonal adjustment factors are used to adjust ""raw data"" by taking into account seasonal fluctuations which are known to affect the raw data.

Historically in June and July, auto workers were furloughed while plants were re-tooled for new models. Furloughed workers qualify for unemployment insurance and artificially increasing claims without using a seasonal adjustment. Unadjusted claims jumped nearly 70,000 despite the holiday-shortened week.

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The adjustment factor for the week ended July 6 was the highest since January.

The four-week moving average of initial claims â€" a statistical device used to smooth the more volatile weekly data - fell to 376,500 from 386,250, the largest week-week decline since May 2011.

The four-week moving average of continuing claims rose 1,250 to 3,308,500.

The report will have no impact on the Employment Situation report for July to be released August 3. That report will be based on employment data for the week including July 12. The Initial unemployment claims report for that week will be issued next Thursday.

That initial claims fell to 350,000 though is something of a milestone. Economists have long held that 350,000 first time claims is a tipping point with claims at that level or below signaling a strong or strengthening labor market. But since claims reports are routinely revised â€" up for all but three of the weekly reports this year â€" analysts won't know until next week if the 350,000 level holds.

The total number of people claiming benefits in all programs â€" reported on a two-week lag - for the week ending June 23 was 5,874,035, an increase of 17,011 from the previous week. According to the latest BLS report, 12.749 million people were officially counted as unemployed in June.

States reported 2,606,287 persons claiming EUC (Emergency Unemployment Compensation) benefits for the week ending June 23, a decrease of 9,842 from the prior week, the Labor Department said. There were 3,234,115 claimants in the comparable week in 2011.

According to the Labor Department detail, also reported on a one-week lag, the largest increases in initial claims for the week ending June 30 were in New York (+4,473), Kentucky (+2,252), Michigan (+1,742), California (+1,045), and Oklahoma (+843), while the largest decreases were in Florida (-3,724), Texas (-2,196), Pennsylvania (-2,113), Massachusetts (-1,325), and Maryland (-806).