WASHINGTON - Initial claims for U.S. state unemployment benefits plunged by 26,000 to 350,000 in the July 7 holiday week, the lowest level since 348,000 in the March 8, 2008 week, as the impact of auto retooling shutdowns was smaller than seasonal adjustment factors has expected, the Labor Department reported Thursday.

The median estimate of economists surveyed by MNI was for 370,000, a drop of 4,000 from the initially reported 374,000 level in the June 30 week. That week's claims level was revised up slightly to 376,000.

A Labor Department analyst said that first week of July is typically marked by a surge in manufacturing retooling shutdowns, particularly in the auto production industry. In addition, the beginning of a new quarter as well as the Independence Day holiday typically complicate the claims data in the first week of July. No states were estimated in the current week, the analyst said.

The analyst said seasonal factors had expected a jump of about 28.0%, or 103,446, in unadjusted initial claims in the week. Actual unadjusted claims rose only 18.9% or 69,971 to a level of 439,743. Unadjusted claims were at a level of 473,963 in the comparable week a year ago.

Auto retooling shut-downs were typically concentrated at the beginning of July in past years, but in more recent times have not stuck strictly to that schedule. As a result, some seasonal adjustment difficulty is likely in the coming weeks and the 4-week moving average could be a better diagnostic measure.

The initial claims seasonally adjusted 4-week moving average was 376,500 in the July 7 week, a decline of 9,750 claims from the previous week.

The state data released for the June 30 week indicated unadjusted initial claims increased in 36 states and declined in 16 states, with 1 state unchanged. The District of Columbia, Puerto Rico, and Virgin Islands are included in this data.

Continuing claims came in at 3.304 million after seasonal adjustment in the June 30 week, down 14,000 after an increase of 16,000 in the previous week.

Unadjusted continuing claims were down 42,328 to 3,102,691 in the week, and were still below the 3,534,925 level in the comparable week a year ago.

The seasonally adjusted insured unemployment rate held steady at  2.6% for the 16th straight week in the June 30 week, still down from the 3.0% rate in the comparable week a year earlier.

The unemployment rate among the insured labor force is well below that reported monthly by the Labor Department because claims are approved for the most part only for job losers, not the job leavers and labor force reentrants included in the monthly report.

The Labor Department said that the level of unadjusted Emergency Unemployment Compensation benefits claims fell by 9,842 in the June 23 week, bringing that category total to 2,606,287. Extended benefits claims fell by 3,453 to 43,972 not seasonally adjusted in the same week.

The Labor Department reported that a total of 5,874,035 persons claimed unemployment benefits in the June 23 week, a rise of 17,011 from the previous week, but still well below the 7,482,410 persons in the comparable week a year ago. These data are not seasonally adjusted, and include regular state claims, federal employee claims, new veterans claims, the EUC and extended benefits programs, state additional benefits, and STC/Workshare claims.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

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