Jobless claims plummet, but there’s a catch

Updated

Occasionally, when economic news is so great that you’re left thinking, “This can’t be right,” it’s wise to trust your instincts. The newly released figures from the Department of Labor on initial unemployment claims offer an example of this.

The number of new applications for U.S. jobless benefits fell below 300,000 for the first time since 2006, but the government attributed the surprising plunge to computer-related delays instead of a sudden improvement in the labor market. Initial claims sank by 31,000 to 292,000 in the week ended Sept. 7, marking the lowest level since April 2006.

Yet a Labor Department official on Thursday said two states made changes to their computer systems that resulted in some claims not being processed in time. The Labor Day holiday may have also skewed the report. As a result, initial claims are likely to rise in the following week and probably move closer to their prior range of around 325,000.

In other words, take this one with a grain of salt.

To reiterate the point I make every Thursday morning, it’s worth remembering that week-to-week results can vary widely, and it’s best not to read too much significance into any one report.

In terms of metrics, when jobless claims fall below the 400,000 threshold, it’s considered evidence of an improving jobs landscape, and when the number drops below 370,000, it suggests jobs are being created rather quickly. At this point, we’ve been below 340,000 in eight of the last nine weeks.

Above you’ll find the chart showing weekly, initial unemployment claims going back to the beginning of 2007. (Remember, unlike the monthly jobs chart, a lower number is good news.) For context, I’ve added an arrow to show the point at which President Obama’s Recovery Act began spending money.

Jobless Claims

Jobless claims plummet, but there's a catch

Updated