Jobless claims fall sharply

Number of Americans filing for unemployment benefits drops to a three-month low.

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By Lara Moscrip, contributing writer

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NEW YORK ( -- The number of Americans filing for first-time unemployment benefits dropped sharply from last week to a three-month low, according to a government report released Thursday.

The Labor Department said that initial filings for state jobless benefits fell 24,000 to 467,000 for the week ended Jan. 3.

That figure was the lowest since the week ending Oct. 11, when initial claims were at 463,000.

Economists polled by expected the reading to come in at 550,000 claims.

Jobless claims have eased for the past two weeks since surging to a 26-year high of 589,000 claims reported for the week ended Dec. 20. However, both of the declines came in weeks that included major holidays - New Year's Day last week and Christmas Day the previous week.

Joshua Shapiro, an economist at Maria Fiorini Ramirez Inc., said that he thinks the impact of the holidays clouded the report, and that weekly claims data won't show underlying trends until the first or second week of February.

Fellow economist Ian Shepherdson of High Frequency Economics agreed, adding that he expects to see jobless claims surge before falling off later this year.

"We have to expect a hefty rebound and new highs in claims over the next few months. A downshift in the pace of layoffs will come later this year, but it is unrealistic to expect it to start now," Shepherdson wrote in a statement.

Over the past four weeks, new unemployment claims have fallen by 27,000 to an average of 525,750 a week, from the 552,750 the week prior.

The four-week moving average is designed to smooth out some of the week-by-week fluctuations, and give a broader view of the U.S. job market.

The number of people continuing to collect unemployment insurance for one week or more increased by 101,000 to 4.61 million in the week ended Dec. 27, the most recent data available.

Over the previous four weeks, the number of people on unemployment for one week or more increased by 45,000 to an average of 4.47 million a week, the government said.

The greatest number of layoffs were reported in Wisconsin, with layoffs in construction, Missouri, which reported shutdowns related to the holidays and Kansas, with layoffs in manufacturing.

Many economists believe that in order to create demand for goods and services, the government needs to revamp the economy with stimulus and deficit spending.

In a speech Thursday morning, President-elect Barack Obama will make the case for his stimulus program, which he has said will save or create 3 million jobs over the next two years.

Part of his plan, which is estimated to cost between $675 and $775 billion, would establish a new credit for businesses that either create jobs in the U.S. or avoid layoffs.

Thursday's initial claims report came a day before the government's December jobs report, which is expected to show a decline of 475,000 jobs, with the unemployment rate surging to 7% from 6.7% in November.

In the first 11 months of 2008, 1.9 million jobs have disappeared, including 533,000 in November.

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