Your Economy (No Politics)

[Bullwinkle]

New US jobless claims fall to 291,000, 5-year low
Thu Jan 5, 2006 8:31 AM ET


WASHINGTON (Reuters) - The number of U.S. workers filing new claims for unemployment aid plunged by an unexpectedly large 35,000 last week to the lowest level in more than five years, a government report showed on Thursday.

The Labor Department said 291,000 initial claims for state jobless benefits were filed in the week ended December 31, the lowest number since September 2000 and down from a revised 326,000 in the prior week. It was the largest weekly drop since late September.

A department analyst said there were no special factors to account for the decrease, but cautioned there is often great volatility in the data around holidays.

The decrease in claims was much larger than analysts on Wall Street had anticipated. Forecasters had expected initial claims to dip slightly to 320,000 last week from the originally reported 322,000 for the prior week.

The larger-than-expected drop brought a four-week moving average of initial claims, which smooths weekly volatility to provide a better view of underlying labor market trends, down by 9,250 to 316,750, its lowest level since August.

The report showed the number of people still on the rolls after an initial week of benefits rose by 13,000 to 2.72 million in the week ended December 24, the latest for which figures are available. It was the fourth straight week these so-called continued claims had moved higher.

The claims data, which suggested robust labor-market conditions, came one day ahead of a closely watched monthly Labor Department report on employment.

Economists expect that report to show a solid 200,000 gain in the number of workers on nonfarm payrolls in December, with the unemployment rate holding steady at 5 percent.

Minutes from a mid-December meeting of Federal Reserve policy-makers released on Tuesday showed some officials think the United States might currently be near full employment.

While Fed officials have indicated their 1-1/2 year campaign to raise interest rates is likely winding down, they have warned that a tightening of labor markets could raise inflation risks -- suggesting it might also provide the impetus for them to continue pushing borrowing costs higher.

So far, the Fed has raised the benchmark overnight rate to 4.25 percent in 13 small steps dating to June 2004. Financial markets expect another quarter-percentage point increase at the Fed's meeting on January 31, with some chance of a further move in late March.

http://today.reuters.com/news/newsarticle.aspx?type=businessNews&storyid=2006-01-05T133131Z_01_H...