New claims for unemployment benefits dropped sharply in the latest week, The Labor Department said Thursday.
Claims tumbled to 391,000, down 37,000 from a revised 428,000 in the previous week and below the key 400,000 mark. Economists say that claims need to drop below 400,000 for an extended period to put a dent in the 9.1 percent unemployment rate. They need to drop below 375,000 for substantial job growth.
"That drop is good, but we're so jaded as investors that it is almost a nonbeliever. Hard to believe that this number is true," Todd Schoenberger, managing director of Landholt Trading, told Reuters.
The 4-week moving average, which smoothes out wrinkles in the data, was 417,000, a decrease of 5,250 from the previous week's revised average of 422,250. The data was a ray of hope that layoffs were easing, although the jobs market remains deep in the shadows after showing the economy created no new jobs in August.
The Associated Press reported that a Labor Department spokesman said some of the weekly drop was due to technical difficulties related to seasonally adjusting the figures. The spokesman added some states also reported higher applications in previous weeks due to Hurricane Irene, The AP story said.
Separately, Commerce Department data showed the economy grew at a sluggish pace in the spring, although slightly better than the government had estimated previously. The economy grew at a 1.3 percent pace in the spring, the data show, up from the previous estimate of a 1.0 percent growth rate. Thursday's data is the third and final revision for the snapshot of the output of goods and services produced by businesses and property in the U.S.
"It's certainly encouraging for the outlook for the U.S. economy. The final print of second-quarter GDP came out a little bit faster than expected and that suggests the U.S. economy entered the third quarter on a slightly better footing. That encouraging news was reinforced by the larger-than-expected decline in jobless claims, which again cast doubt on the likelihood of the economy tipping back into recession," Travelex Global Payments senior analyst Joe Manimbo told Reuters.
