First-time jobless benefit claims plunge. But auto industry retooling distorts data

Initial claims for unemployment insurance compensation fell to a seasonally adjusted 350,000 for the week ending July 7, the Department of Labor reported Thursday. That was a decrease of 26,000 from the previous week's upwardly revised figure of 376,000. It marked the lowest level for first-time claims since March 2008. Last year at this time, first-time claims were 410,000.

The four-week running average, which analysts prefer because it flattens volatility in the weekly numbers, was 376,500, down 9,750 from the previous week's revised average of 386,250.

If first-time claims were to remain at or near this level, it would mark the first major downward move in this much-watched metric since January, suggesting that the labor market may be headed for improvement. But analysts say the numbers have more to do with the unpredictability of timing of annual automobile industry retooling than any real change.

Last week's distortion is likely to unwind slowly over coming weeks, a Labor Department spokesman said as the data was released to the press.

Automakers including Chrysler Group LLC, Ford Motor Co. (F) and Nissan Motor Co. are keeping more plants than normal open during this time of year to fulfill demand and replenish inventories. For that reason, it may take time to determine if the labor market is making any progress.

'This week, seasonal adjustments assume heavy layoffs because of temporary auto shutdowns, and they're assuming more layoffs than they did last year,' David Sloan, a senior economist at 4Cast Inc. in New York, said before the report. Therefore the data will be 'misleading,' he said.

For all jobless benefit programs, including emergency federal extensions, the total number of people claiming benefits for the week ending June 23 was 5,874,035, an increase of 17,011 from the previous week.