In the best performance since July 2008, weekly unemployment claims fell sharply to 407,000. The 4-week moving average dropped to 436,000. In response, the dollar was firm and US treasuries had a mild selloff.

Bloomberg reports U.S. Jobless Claims Decline to Lowest Since July 2008

Applications for unemployment benefits in the U.S. fell more than forecast last week to the lowest level since July 2008, reinforcing evidence the labor market is healing.

Household purchases advanced 0.4 percent after a 0.3 percent gain in September that was larger than previously estimated. Incomes climbed 0.5 percent.

Orders for U.S. goods meant to last several years unexpectedly decreased in October, the Commerce Department also said. Demand for so-called durable goods dropped 3.3 percent, the biggest plunge since January 2009, after a revised 5 percent jump in September that was larger than previously estimated.

Claims typically increase during the period between the Veterans Day and Thanksgiving holidays, and the Labor Department’s seasonal adjustment process takes that into account. During the latest week, fewer Americans than usual filed claims, a Labor Department spokesman said as the figures were released, allowing seasonally adjusted filings to decrease more than forecast.

Seasonal Adjustment Outlier?

Before anyone gets too excited over today’s numbers, the last paragraph above may help explain what is going on.

Retailers have been ramping up with temporary holiday hiring at the fastest clip in years. Whether that translates into long-term employment remains to be seen.

Seasonal adjustments have been unusually large recently, for reasons not explained by the BLS. For a better look at what’s really happening, please see …

Looking Ahead

I suspect things are improving, for now, although not at the rate implied by this decrease, and not enough to put any kind of dent into the unemployment rate. Looking ahead, we have mighty high expectations of Christmas sales, and nearly everyone has failed to factor in the effect of state cutbacks.

Moreover, within the next two months, 2 million people are set to use up all of their unemployment insurance benefits, maxed out at 100 weeks. With recent news on jobs, real or imagined, Republicans may be less inclined to extend those benefits in the lame-duck Congressional session.

Regardless, structural headwinds are enormous.

Yield Curve as of 2010-11-24

Once again we see an unwinding of the QE II sure-thing trade, with the middle part of the yield curve selling off at the fastest rate.

7-Year Treasury yields rose 13 basis points, but 30-year treasury yields only rose 7 basis points.

Mike “Mish” Shedlock
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