Economic growth: unemployment claims hit lowest level in two years

Unemployment claims fell below 400,000 the week before Christmas, the latest indicator of continued slow economic growth.

By , Staff writer

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    The Philadelphia Unemployment Project hands out toys at the Arch Street Methodist Church in Philadelphia on Dec. 22.
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The number of Americans filing claims for unemployment insurance fell below 400,000 in the week before Christmas, reaching its lowest level in more than two years.

The Labor Department said Thursday that new jobless claims totaled 388,000 for the week, some 34,000 lower than the week before. The report adds to other signs of improvement in the labor market and economy as the calendar rolls toward a new year.

Claims for unemployment benefits are an important indicator of the job market's health, in essence a signal of how many people are losing jobs involuntarily and with no immediate employment option. Because some layoffs are always occurring, the jobless-claims figures were running above 300,000 per week even before the recession began.

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The figures peaked at more than twice that level, in early 2009, and then fell sharply as the financial crisis eased. But through most of 2010 the numbers of newly unemployed filing for benefits have remained stubbornly high – above 450,000 per week.

What's significant about the year-end drop is not just the dip below 400,000, although that's a symbolic marker. More important is that unemployment claims have been trending downward for several months. All the numbers cited here are seasonally adjusted (hence the "SA" in this chart) by the Labor Department, to help show trends more clearly.

"This report is generally a positive sign for the labor market, though we'll need to wait two weeks for a 'cleaner' reading on new claims," economists at Goldman Sachs said in a note to clients analyzing the data. That's because claims can sometimes post big moves in holiday weeks, and next week's report may be affected also by the Northeast blizzard.

Other economic reports Thursday also had an positive tilt.

Pending home sales rose 3.5 percent in November, suggesting a rise in the volume of real estate transactions early in the new year, the National Association of Realtors said. And an index of Midwest manufacturing (the Chicago purchasing managers' index) jumped more than expected, including an improving gauge of factory employment.

The news doesn't mean that the nation's high level of unemployment is poised for a rapid decline.

Even in a strengthening labor market, economists expect the recovery to be gradual. But the signs of life among consumers and businesses as the year ends raise hopes that jobs will become less scarce in 2011.

Here's a look at the health of the job market, as seen in other important indicators:

• Some 4.45 million help-wanted postings are advertised on the Internet as of November, according to the Conference Board, a business research group. Currently there are about 3.37 people officially unemployed for every one of those vacancies, down from a peak of 4.73 in October 2009. Many of the vacancies are in relatively high-paying fields such as management, computer science, and health care.

• The "employment trends index," a compilation of indicators designed by the Conference Board as a jobs forecaster, also rose in November and for the year.

• The Labor Department will report monthly employment numbers on Jan. 7, and many economists expect a gain of about 100,000 private sector jobs for December, up from 50,000 in November. A separate Labor Department survey of job openings improved in an early December report.

• The official unemployment rate was 9.8 percent in November, a number that has changed little over the past year. That's largely because new people have been entering the labor force even as some new jobs are being created. Unemployment is about 17 percent in a broader measure that includes part-time workers who want full-time jobs, and the discouraged who have stopped looking for jobs.

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