The number of people filing for unemployment benefits fell sharply in the final week of 2008, yet analysts were quick to point out that difficulties in adjusting the data during the holiday period was likely responsible for the lower-than-expected figure, rather than any tangible turnaround.
First-time claims for unemployment benefits came in far below consensus in the week ending Dec. 27, yet the number of people continuing to receive benefits was much higher than anticipated. Initial claims for unemployment benefits in the United States fell to 492k in the week, following a 16-year high of 586k claims in the prior week. The dip ends a seven-week streak above the half a million mark.
Economics strategist Ian Pollick from TD Securities said not to pay any attention to the initial claims figure, as the rosy picture gleaned from the data is unlikely to be confirmed by other data.
"Special one-off factors such as a shortened holiday work week coupled with layoff deferrals in the auto sector should correct in the coming weeks," he said.
Initial jobless claims were forecast to fall to 575k. The much lower-than-expected figure is the lowest reading since Nov. 1.
John Ryding and Conrad DeQuadros from RDQ note there was almost no change in the seasonally unadjusted initial jobless claims figure, suggesting that virtually all of the change can be accounted for by holiday factors.
"Given that these data cover the Christmas holiday and a period of winter storms that may have prevented people from filing, we are not reading much into this decline in jobless claims," they wrote in a client note.
Meanwhile, continuing claims - the number of people currently receiving jobless benefits - rose markedly to 4.506 million in the week ending Dec. 20, higher than the consensus forecast for a reading of 4.400 million. This is the sixth week that continuing claims have been above the four million mark, and the 33rd straight week above three million.
The four-week moving average is now 4.422 million, up from the moving average of 4.319 million in the previous week. At the current pace, it won't be long until the all-time high for continuing claims - 4.713 million, recorded in November 1982 - is broken.
RDQ added that, "At this point, we look for a 500,000 decline in nonfarm payrolls in December and a rise in the unemployment rate to 7.0% from 6.7%."
By Patrick McGee and edited by Stephen Huebl
©CEP News Ltd. 2008