U.S. jobless claims plunge unexpectedly

The number of Americans filing for unemployment benefits fell below 500,000 for the first time since November, according to new figures released Wednesday, a positive economic sign for the United States that has some analysts scratching their heads.

The initial jobless claims for the week ended Dec. 27 across the U.S. plunged by 94,000 to 492,000. That drop was far larger than the 11,000 reduction economists had predicted.

The number of people asking for public unemployment benefits has generally risen since the last time the figure was less than 500,000, the week ended Nov. 1, and has been viewed as a sign of the deteriorating economy in the U.S.

Normally, such a large reduction would be accompanied by other good economic news.

In this case, however, the data out of the U.S. continues to be bad.

Earlier in the week, the Conference Board's index for consumer confidence hit an all-time low for December and U.S. home prices posted an 18 per cent drop comparing this October to the same month last year.

No explanation

In addition, the U.S. Labour Department, which tracks the jobless claims, usually gives some explanation for wide swings in these figures. In this case, however, the department offered no explanation for the shift.

Indeed, in the accompanying notes, states such as Massachusetts, South Carolina and Connecticut, which posted the largest reductions in jobless claims, did not offer an explanation for the change, either.

"The numbers seemed unbelievable but the states certified they were correct," a Labour Department official told one wire service.

Other experts pointed to a variety of reasons for the unexpected drop in jobless claims, including the seasonal hiring associated with the Christmas selling season and the short period measured, which can result in data swings.

The four-week moving average for jobless claims, a less volatile indicator, showed initial requests of 552,000 for the four weeks ended Dec. 27, compared with 558,000 for the four weeks ended Dec. 20.

Next week's jobless claims report is likely to be distorted again by the shortened week due to the New Year's Day holiday, analysts said. With government offices closed for the holiday, there's less time for people to file for unemployment benefits.

"The bottom line here is that it probably won't be until mid-January that we begin to get a clear picture of what claims are saying," said Abiel Reinhart, an economist at JPMorgan Chase Bank.

with files from Associated Press