Initial Claims totaled 522k, 31k less than expected and down sharply from 569k last week. Again, the auto sector is depressing the number. In July automakers normally shut down plants but because Chrysler and GM shut plants over the past few months due to their bankruptcies and just restarted them, we aren’t going to see the seasonal July shutdowns, thus the claims data was skewed lower artificially. The other major surprise was the huge drop in Continuing Claims which fell 642k from last week’s record high and at 6.273mm, it’s the lowest since April. As a result, the insured unemployment rate fell to 4.7% from 5.2%. According to DJ, a Labor Dept analyst said “this big drop is not necessarily an indication of what is going on economically” due to the layoffs in the auto sector and other manufacturing industries. The data should normalize in a week or two according to the analyst. Thus, be careful extrapolating too much from the data.
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