WASHINGTON - Initial claims for U.S. state unemployment benefits plunged by 35,000 to 353,000 in the July 21 week, erasing the previous week's increase as seasonal adjustment volatility continued, the Labor Department reported Thursday.

The median estimate of economists surveyed by MNI was for 380,000, a decline of 6,000 from the initially reported 386,000 level in the July 14 employment survey week. That week's claims level was revised up slightly to 388,000.

A Labor Department analyst said there was nothing unexpected in the reports filed by states, with only claims data for Utah estimated.

He did tell MNI that the massive jump in unadjusted claims in the July 14 employment survey week, aside from auto retooling shutdowns, was fed mainly by an unexpected increase of 26,244 claims reported by California -- layoffs in the service industry -- and an 11,948 jump in North Carolina -- layoffs in the transportation equipment, textile mill products, furniture, and heavy construction industries.

He said the volatility seen in the data so far means the 4-week moving average could be a better diagnostic measure, as it helps "smoothen out" the volatility.

For the July 21 week, the analyst said seasonal factors had expected a decline of about 18.7%, or 85,000, in unadjusted initial claims in the week -- following the sharp increase that it expected at the beginning of July.

Instead, unadjusted claims fell by 26%, or 118,201 claims, to a level of 337,059. Unadjusted claims were at a level of 369,207 in the comparable week a year ago.

The initial claims seasonally adjusted 4-week moving average fell for the fifth straight week, down 8,750 to 375,500 in the July 21 week. This was the lowest level since the March 31 week.

The state data released for the July 14 employment survey week indicated unadjusted initial claims increased in 20 states and declined in 33 states, with no states unchanged. The District of Columbia, Puerto Rico, and Virgin Islands are included in this data.

Continuing claims came in at 3.287 million after seasonal adjustment in the July 14 employment survey week, down 30,000 after a slight increase of 3,000 in the previous week. This was the lowest level since the May 19 week.

The level of continuing claims was down 15,000 from the 3.392 million level in the June 16 employment survey week.

Unadjusted continuing claims were down 26,780 to 3,333,287 in the July 14 week, and below the 3,752,532 level in the comparable week a year ago.

The seasonally adjusted insured unemployment rate held steady at 2.6% for the 18th straight week in the July 14 survey 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 the level of unadjusted Emergency Unemployment Compensation benefits claims rose by 32,093 in the July 7 week, bringing that category total to 2,556,456. Extended benefits claims fell by 4,986 to 36,127 not seasonally adjusted in the same week.

The Labor Department reported that a total of 6,034,225 persons claimed unemployment benefits in the July 7 week, a 280,405 jump from the previous week but still well below the 7,643,118 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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