WASHINGTON — The U.S. initial unemployment claims reading of 358,000 in the October 12 week probably is providing a "false signal" about underlying labor market trends, and instead reflects the temporary effects of the U.S. government closing on private jobs. Still, this implies that October payrolls could come on the weak side of recent readings.
Initial claims were down 15,000 and the still-high 358,000 level is likely to decline sharply ahead after two weeks of elevation. It compares to 311,000 in mid-September and this is the main reason to expect a poor showing for October payrolls.
Federal employees are not included in the headline number--there were another 70,068 federal civilian employee claims in the October 5 week, an increase of 68,677 from the prior week. These were mainly in the states of Maryland (17,368) and Texas (7,191), and to a lesser extend in Pennsylvania, Utah and Washington.
The underlying trend for claims appears close to 310,000, and we would expect claims to steady there in late October. That would give two more weeks for claims to return to normal.
Continuing claims were also reported down 43,000 to 2.859 million in the October 5 week.
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