US initial claims dropped 10,000 to 340,000 in the week ending October 26, 2013. This built on a 12,000 drop to 350,000 the previous week. The level of claims in the latest week was only slightly above market expectations for a 338,000 reading.
The four-week moving average of initial claims rose for a fourth consecutive week, climbing to 356,250 from 348,250 the previous week. This left the four-week moving average at its highest level since April 2013.
Initial unemployment claims filed by Federal employees are reported in a separate category and do not enter directly into the seasonally adjusted claims figure. These data are also released with a one-week lag. In the week ending October 19, 2013, the week that the partial shutdown of the federal government ended, 14,000 federal employees filed initial claims for unemployment insurance benefits, which was down from 44,000 for the previous week.
Initial claims were reportedly boosted in recent weeks by the clearing of a backlog of claims created by computer problems in California that were also likely to blame for an earlier sharp drop in claims filed in September. The drop in claims in the latest week suggests that this backlog is continuing to be cleared. Recent distortions in the weekly data make it difficult to separate shock from trend; however, we expect that the underlying pace of layoffs remains broadly consistent with decent underlying improvement in labour markets. Federal workers furloughed during the government shutdown will ultimately be paid for their time off work and, therefore, will still be counted as employed in the payroll employment survey. With that said, while the layoff side of the employment equation remains good and consistent with respectable job growth, hiring by the private sector may have been affected in October by uncertainty about the outlook created by both the government shutdown and contentious debt ceiling debate in the month. We expect employment growth in October will be little changed from the smaller than expected 148,000 increase in September.
RBC