A continued decline in initial claims for unemployment resulted in roughly 10,000 fewer than last week’s upwardly revised total of 524,000. For the fifth time now in six weeks, this figure has declined, beating the Thomson Reuters forecast by 2%, with the four-week average falling six times in a row to 531,500. The initial claims figure is incredibly important because it is a direct expression of lay-offs and the overall propensity within the labor market for hiring.

Several economic analysts have pegged the floor below 200,000 job losses for October, which would set a record for the year. However, the unemployment rate is at 9.8%, the highest in 26 years, and the labor market has lost 7.2 million jobs since December 07. Although initial claims paint a somewhat rosy picture, suggesting improvement, the labor market is still well below the 325,000 benchmark for initial claims, which is an historical indicator of overall economic stability.

Continuing claims, which trail behind initial claims by a week, fell 12.3% to just under 6M for the first time since the end of March. With the majority of those represented being shifted into extended benefit programs created by Congress, which adds 53 onto the 26 weeks provided by the states, the Sept. 26 tally for benefit recipients rises 40,000 from the previous week to 8.87M, when extended program data is included.

Fed Chair Bernanke indicated that the jobless rate would stay over 9% despite the economist-validated 3% growth rate for the economy. While Bernanke affirmed the 3% rate, he also confirmed investor’s analysis that growth wouldn’t be enough to bring down unemployment. With additional Labor Department data showing a 0.2% rise in consumer prices for September, in stark contrast to the preceding 12 months, there is evidence for improving consumer confidence in the market.

The market is off slightly today from yesterday’s highs, driven by earnings data from JP Morgan Chase. Scott MacDonald, research head at Aladdin Capital, suggested that the rally is a result of “spiking” by the Fed; this view posits that the entire dynamic is a result of artificial capital injection, led by banks which are not increasing lending to small businesses, thus masking the lack of a real recovery.

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