New unemployment benefit claims drop below 400,000

The number of people who filed for jobless benefits fell below 400,000 last week for the first time since early April, a decline probably aided by workers returning to manufacturing jobs after plants were retooled.

New applications for unemployment compensation dropped by 24,000, to 398,000, the Labor Department said Thursday. Initial claims from two weeks ago were revised up to 422,000 from an original reading of 418,000.

Economists surveyed by MarketWatch had expected new requests for jobless benefits to fall to 413,000 in the latest week.

The average of new claims over the last four weeks, meanwhile, declined by 8,500, to 413,750, also the lowest level since April. The four-week average is seen as a more accurate gauge of labor trends because it irons out volatility in the week-to-week data.

Claims often fall sharply in the third week of July as workers in certain parts of the manufacturing sector return to their jobs. Automakers and some other manufacturers usually close plants in early July to retool them to make the latest model of products.

As a result, claims data in July can be more volatile than in other months, making it harder to figure out trends in the U.S. labor market. In 2010, for example, jobless claims fell in the same week of July but then rose for the next three weeks.

Economists say claims would have to continue to fall to signal definitive improvement in hiring trends. Until the last week, jobless claims had topped the key 400,000 level for four months; they had hit a three-year low of 375,000 in late February. Applications usually fall far below 400,000 in a period of rapid hiring.

While the decline “is clearly good news, we would prefer to see further data before concluding that the earlier downtrend in claims is being reestablished,” said Joshua Shapiro, chief U.S. economist at MFR Inc.

The Labor Department said the number of Americans who continue to receive state unemployment checks decreased by 17,000, to 3.7 million, in the week that ended July 16. Continuing claims are reported with a one-week lag.

Bartash writes for MarketWatch.com / McClatchy