New claims for unemployment benefits fell more than expected last week, but a rise in the four-week moving average to a six-month high indicated the labor market recovery will remain painfully slow.


* Initial claims for state unemployment benefits fell 29,000 to a seasonally adjusted 409,000, the Labor Department said on Thursday, continuing to unwind the prior weeks' spike. * Economists polled by Reuters had forecast claims dropping to 420,000. The prior week's figure was revised up to 438,000 from the previously reported 434,000. * The four-week moving average of unemployment claims, a better measure of underlying trends, rose 1,250 to 439,000 - the highest level since mid-November.



Clearly what it shows is an ongoing healing in the labor market. The recent data have been skewed by special factors like the Easter holiday and supply chain issues coming out of Japan. That being said some of the increase in jobless claims have been organic due to the slowing in the economy.

You have to look at the four-week moving average which is at 439,000. It was running well above what it has been recently. There is no reason that a slowing in the economy would not affect the labor market.

The recent trend of 230,000 in payroll growth will likely slow to 175,000 to 200,000. That should suggest that the recovery is slowing but not derailed.


While the latest initial claims number provides some encouragement, the 4 week average of 439k is the highest since November 13 2010, and is up from 399.25k in April's payroll survey week, and 388.5k in March's. Only part of this rise in the 4 week average can be attributed to special factors that are now unwinding, assisting but not fully explaining the latest weekly decline.

This is the 2nd straight fall in initial claims, following a 40k fall in the week to May 7. The state breakdown of the May 7 week (which is not seasonally adjusted) shows the fall was led by a 23k fall in New York, following a bounce due to a spring break that the seasonal adjustments failed to pick up. That was the main reason claims ended April at 478k, the highest level of the year to date. Last week's breakdown shows the largest rise came in Alabama, by 6k, a consequence of tornadoes in the state. Some of this week's fall is related to the reversal of that effect, with weather not cited as a special factor this week. The declines in claims in the last 2 weeks appear to go a little beyond what the unwinding of special factors in these 2 states imply. Interpretation of the data is tricky with the state data not seasonally adjusted, but we cannot attribute this week's decline solely to seasonal factors. Unadjusted claims fell by a sharper 40k.

MARKET REACTION: STOCKS: U.S. stock index futures add to gains. BONDS: U.S. bond prices extend losses. FOREX: The dollar extends gains versus the yen.