New jobless claims drop more than expected

The number of newly-laid off U.S. workers seeking unemployment insurance fell last week, the government said Thursday, fresh evidence that layoffs are easing.

The Labor Department said that initial claims for jobless benefits dropped to a seasonally adjusted 550,000 for the week ending Aug. 1, down from an upwardly revised figure of 588,000 in the previous week.

That’s much lower than analysts’ estimates of 580,000, according to a survey by Thomson Reuters. The four-week average of claims, which smooths out fluctuations, dropped to 555,250, its lowest level since late January.

The tally of people continuing to claim benefits rose, however, by 69,000 to 6.3 million, the department said, after dropping for three straight weeks. The continuing claims data lag initial claims by a week.

Many economists expect initial claims to continue to decline this year.

“Claims should fall over the next few months, as the economy appears more or less to have stabilized,” Ian Shepherdson, chief U.S. economist at High Frequency Economics, said in a note to clients before the department’s report.

When emergency extensions of unemployment are included, the total rolls climbed to a record 9.35 million for the week ending July 18, the most recent data available. Congress has added up to 53 extra weeks of benefits on top of the 26 typically provided by the states.

The increase in the number of people continuing to claim benefits is a sign that jobs remain scarce and the unemployed are having difficulty finding new work.

Despite the improvement, weekly jobless claims remain far above the 300,000 to 350,000 that analysts say is consistent with a healthy economy. New claims last fell below 300,000 in early 2007.