New jobless claims drop unexpectedly

The number of newly laid-off workers seeking unemployment benefits fell last week to the lowest level since early July,
possible evidence that job cuts are slowing.

The Labor Department said today that initial claims for unemployment
insurance dropped to a seasonally adjusted 545,000 from an upwardly revised 557,000 the previous week. Wall Street economists
expected claims to rise by 5,000, according to Thomson Reuters.

The decline was the third in the past four weeks.
The four-week average, which irons out fluctuations, dropped 8,750, to 563,000. Despite the improvement, that’s far above
the 325,000 per week that is typical in a healthy economy.

"The message here is that the labor market’s healing
process is agonizingly slow," Joshua Shapiro, chief economist at MFR Inc., wrote in a note to clients.
The number
of people claiming jobless benefits for more than a week rose by 129,000, to a seasonally adjusted 6.2 million. The continuing
claims data lags initial claims by one week.

When federal extended benefits are included, 9.01 million people received
unemployment insurance in the week ending Aug. 29. That’s down from 9.16 million the previous week. Congress has added up
to 53 weeks of extended benefits on top of the 26 weeks provided by the states.

Today’s report comes a day after
the Federal Reserve said production by the nation’s factories, mines and utilities increased for the second straight month
in August, the latest sign the economy is recovering.

But the economy isn’t improving fast enough to spur greater
hiring. Fed Chairman Ben Bernanke on Tuesday said the recession is likely over, though he noted that the economy isn’t likely
to grow fast enough to lower unemployment anytime soon.

The jobless rate is widely expected to peak next year above
10 percent, up from its current 9.7 percent. Some analysts say that claims need to drop below 400,000 before the unemployment
rate will start to decline.
 

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