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First-Time Jobless Claims Drop Sharply

First-time claims for unemployment insurance fell 23,000 to 369,000 for the week ended October 20, the ""Labor Department"":http://www.ows.doleta.gov/press/2012/102512.asp reported Thursday. Economists expected initial claims to fall to 372,000.

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The previous week's report was revised upward to 392,000 first-time claimsâ€"the highest level since mid-Juneâ€"from the originally reported 388,000.

The initial claims report has been unusually volatile for the last month with wide swings in the seasonal adjustment factors used by the Labor Department to ""normalize"" the data. However, the factor used for this week's report was virtually the same as the factor used a week ago, suggesting the sharp drop in claims reflects a truer reading of the labor market.

Continuing claimsâ€"reported on a one-week lagâ€"edged down 2,000 to 3,254,000, the lowest level since the end of April. The previous week's initial report of 3,252,000 continuing claims was revised up to 3,256,000. The continuing claims report tracks the number of longer-term unemployed who qualify for regular state jobless benefits.

The continuing claims report covered the same week used for the upcoming Employment Situation report to be released on November 2 and hints at further positive news regarding jobs. Since mid-September, the number of individuals receiving benefits (continuing claims) is down 28,250. However, the number of first-time claims is up 7,000 since from mid-September to mid-October.

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The November 2 release will be the last reading of the unemployment rate ahead of the November 6 election.

On a longer-range trend basis, the four week moving average of initial claims rose 1.500 to 368,000, and the four week moving average of continuing claims fell 6,750 to 3,269,750, its lowest level since May.

The total number of people claiming benefits in all programs for the week ending October 6 was 4,917,460, a decrease of 84,525 from the previous week. There were 6,679,024 persons claiming benefits in all programs in the comparable week in 2011. Extended benefits were only available in New York during the week ending October 6.

According to the BLS, unemployment was 12,088,000 in September, which means that of those individuals counted as unemployed, 7.17 million were not receiving any form of government unemployment insurance, up from 7.09 million one week earlier.

States have been borrowing from the federal government to cover shortfalls in those funds which will eventually have to be repaidâ€"unless Congress intervenesâ€"with higher assessments on employers. Since those assessments are a percentage of payrolls, they discourage employers from adding new workers. As of October 23, 20 states have an aggregate $27.0 billion in outstanding loans to cover shortfalls, up from $26.8 billion one week earlier. Absent Congressional action, interest on those loans could lead to states increasing contribution rates required from employers.

States reported 2,052,957 persons claiming EUC (Emergency Unemployment Compensation) benefits for the week ending October 6, a decrease of 45,836 from the prior week, the Labor Department said. There were 2,921,937 persons claiming EUC in the comparable week in 2011.

According to the Labor Department detailâ€"also reported on a one-week lagâ€"the largest increases in initial claims for the week ending October 13 were in California (+26,935), Florida (+3,947), Ohio (+1,936), Washington (+1,435), and Alaska (+1,383), while the largest decreases were in New York (-3,395), New Jersey (-1,311), Georgia (-1,285), Massachusetts (-1,141), and Kentucky (-982).

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.
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