U.S. Jobless Claims Continue To Brighten

The number of Americans filing claims for unemployment benefits has fallen for the period ending January 3, 2013. Good news as this is yet another sign the U.S. economy is gaining momentum in its recovery.

Initial claims for unemployment benefits on a state level fell 15,000 to 330,000 (seasonally adjusted). However, last week’s number was revised up 6,000 applications. Economists had expected the number to come in at 335,000. The four week moving average has also fallen. It fell 9,750 to 349,000 claims.

The Labor department mentioned they did not have to estimate with any of the 50 States, however, it was hard to adjust data for seasonal fluctuations. This a problem every year in the month of December as States have difficulty estimating temporary seasonal workers during the holiday season.

Claims are usually very volatile around the holiday season. However, they remained largely consistent with the other indicators within the labor market. This is pointing to a strong and healthy recovery in the job market as well as the overall economy. The Fed is also paying very close attention to these numbers. Last week’s numbers had no bearing on the upcoming FOMC policy meeting. However, today the non-farm payroll (NFP) report will be released. Rest assured the Fed will watch that number closely.

We are expecting the NFP to show 196,000 new jobs were created in December. This comes after November shattered expectations and came in at 203,000. The unemployment rate is expected to hold steady at its five year low of 7.0 percent.

The claims report also showed the number of people receiving benefits rose 50,000 to 2.87 million. There are a total of 4.19 million people receiving benefits under all programs for the week that ended December 28. We are expecting that number to fall over the next few weeks.

The job market has been showing strength and gaining steam. Listening to the bullishness of the last FOMC, as more officials spoke about reducing the QE further and faster, today’s NFP is key. Should it beat expectations, then there is a higher degree of probability the Fed will shave off more from its asset purchasing program next week when they meet. Should the numbers really come in strong and should the unemployment rate rick down as well, then it is a certainty the Fed will reduce its QE by a little more. It is possible the Fed will reduce QE by $7.5 to $10 million again this month.