US initial claims plunged 31,000 in the week ending September 7, the lowest level for the measure since April 2006, following a 10,000 dip to an unrevised 323,000 the previous week.
The number of claims was well below market expectations for a 330,000 reading; however, a Labor Department analyst reportedly noted that much of the decline was due to processing disruptions as two states were upgrading computer systems and were not able to process all of the claims received.
The four-week moving average of initial claims dropped to 321,250, the lowest level since October 2007, although this measure was also biased down due to missing data in the most recent week. Continuing claims for the week ending August 31 dropped 73,000 to 2,871,000.
Much of the unexpected drop in initial claims in the latest week appears to have resulted from processing delays related to the temporary technical problems in some states. This suggests that much of the decline will be retraced as delayed claims are processed. Difficulties seasonally adjusting the data around the Labor Day holiday may also have played a role. While the sizeable decline in today’s report may reflect more distortion than trend, it remains the case that initial claims have trended broadly lower through 2013. Our view remains that underlying conditions in labour markets are continuing to improve.
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