U.S. Initial Jobless Claims Fall

Initial unemployment insurance claims fell -11,000 to 457,000 for the week ending July 24, partially reversing the previous week's 41,000 rise to an upwardly revised 468,000 level (initially reported as 464,000). The drop beat market expectations going into today's report for the level of claims to dip to 460,000. The four-week moving average of initial claims, which normally provides a better indication of the underlying trend in labor markets, slipped to 452,500 from 457,000 (was 456,000) the prior week.

While today's report will have little bearing on the July Payroll Employment report (the survey is conducted for the week containing the twelfth day of the month), the drop in the level of initial claims following last week's rise is encouraging. In particular, the four-week moving average of initial claims remains below its level at the end of June, suggesting it is likely that not all of the sharp declines recorded during the first two weeks in July were attributable to seasonal distortions in the volatile July auto-retooling period. The level of initial claims has been trending sideways since January; however, the elevated level of layoffs has not prevented private-sector job growth from averaging close to 100,000 per month during the first half of this year. As a result, while we expect initial claims to resume a downward trend in the coming months as labour markets improve, today's report remains consistent with our view that underlying job growth (excluding census workers) will remain modest, although still positive, in the near term.