Initial jobless claims drop to 49-year low

US initial jobless claims fell by 13,000 from the previous week's revised level to 199,000, versus expectations for a level of 220,000. This marked the lowest level for claims since 15 November 1969, when it was 197,000.

The previous week's level was revised down by 1,000.

Meanwhile, the four-week moving average came in at 215,000, down 5,500 from the previous week's average, which was revised down by 250.

The four-week average is considered more reliable as it smooths out sharp fluctuations in the more volatile weekly figures, giving a more accurate picture of the health of the labour market.

The figures also showed that initial claims filed by former Federal civilian employees surged by 14,965 to 25,419 in the week ending 12 January as the partial government shutdown rolls on.

Continuing claims - i.e. the number of people already collecting unemployment benefits - fell by 24,000 from the previous week's unrevised level to 1.713m, versus expectations of 1.735m.

Pantheon Macroeconomics said: "We noted last week that the seasonals for this week suggested that a sub-200K reading was possible, but we thought it wouldn’t happen because of people affected by the government shutdown making claims. Note that the numbers for six states - including California, the largest and Virginia, where many federal employees live - are estimated this week, so the headline number could yet be revised significantly.

"For now, though, these data are consistent with our view that the rise in claims in Q4 was mostly due to the two hurricanes and the California wildfires, rather than a fundamental deterioration in the job market. As far as we can tell, the underlying trend in claims remains extremely low and probably hasn’t moved much since last summer. Firms are scared to let people go unless they have no other choice, because it’s so hard to recruit. Note that next week’s seasonals are very unfriendly, and our initial forecast for the headline is 235K."