Jobless Claims Hit Lowest Level Since July 2008

WASHINGTON—The number of U.S. workers filing new claims for jobless benefits slid last week to the lowest level in nearly two and a half years, indicating that labor-market conditions continue to improve.

Initial unemployment claims declined by 34,000 to 388,000 in the week ended Dec. 25, the first time the figure has dropped below 400,000 since July 2008, the Labor Department said Thursday in its weekly report. The previous week's figures were revised up slightly to 422,000 from 420,000.

Economists surveyed by Dow Jones Newswires had expected claims would fall by just 2,000.

The number of U.S. workers filing new claims for jobless benefits slid last week to the lowest level in more than two years, indicating the labor market may be improving. John Shipman discusses.

The four-week average of new claims, which aims to smooth volatility in the data, also fell to its lowest point since July 2008. That more closely watched figure decreased by 12,500 to 414,000.

While seasonal layoffs often pick up in the week before Christmas, a Labor Department economist said there is nothing unusual about the figures reported by individual states.

The ongoing decline in initial claims provides some basis for optimism about the labor market following a disappointing monthly employment report for November. The positive weekly figures suggest the December jobless report, due for release Jan. 7, could show a decline in the unemployment rate from the seven-month high of 9.8% reached last month.

Still, the Labor Department said in Thursday's report that the number of continuing claims—those drawn by workers for more than a week—rose 57,000 to 4,128,000 in the week ended Dec. 18 from an upwardly revised 4,071,000 the previous week. Continuing claims are reported with a one-week lag.

The unemployment rate for workers with unemployment insurance was 3.3% in the Dec. 18 week, up from the prior week's unrevised 3.2% rate.

The state-by-state breakdown of new claims, which is also reported with a one-week lag, showed that California had the largest decrease in claims, 7,656, because of fewer layoffs in the agriculture sector. The largest gain in claims in the week ending Dec. 18 was in New Jersey, with a rise of 5,235, with layoffs in construction, transportation and manufacturing industries.

Meanwhile, the number of U.S. consumers who signed contracts to buy homes rose in November to the highest level in seven months as housing demand gradually improves.

The National Association of Realtors' index for pending sales of existing homes increased 3.5% in November, the industry group said Thursday.

However, the pending-sales index was 5% below its level in November 2009.

Economists surveyed by Dow Jones Newswires had expected pending home sales would climb by 1% in November.

Lawrence Yun, the NAR's chief economist, said he expects a gradual housing-market recovery next year.

But many other economists say the market is heading for a second downturn as foreclosures and unemployment remain high.

The NAR index is based on pending sales of existing homes, including single-family homes and condominiums. A home sale is pending when the contract has been signed but the transaction hasn't closed. Pending sales typically close within one or two months of signing.

In its latest monthly forecast on the industry, the NAR projected existing-home sales of 4.85 million this year and 5.23 million in 2011. That compares with 5.16 million in 2009.

The median price for an existing home is estimated at $172,700 in 2010 and $173,700 in 2011. It was $172,500 in 2009.

Credit : WSJ