New claims for unemployment insurance dropped sharply last week but the decline seems to be due to computer problems in two states rather than any surprise improvement in the labor market.
Claims fell 31,000 to 292,000 in the week ending September 7th, according to the labor Department. Economists in the Bloomberg survey had forecast 330,000 new claimants. It is the lowest number of claims since early 2006.
However, a Labor Department analyst said that the inability of two states, one large and one small, to fully process all their claims due to the upgrading of their computer systems was the source of most of the decline.
The four week moving average sank to 321,250 the lowest since October 2007. But even without last week's reading the average has been steadily receding and has been below 350,000 every week since the beginning of May. The average in August of 331,900 was the least since in almost six years.
The Federal Reserve has emphasized improvements in the labor market as part of the rationale for curtailing its quantitative easing policy, widely expected to be announced next Wednesday at the conclusion of the FOMC meeting.
The substantial and permanent drop in claims over the past several years illustrates one half of the labor picture-firms are not firing people. But it leaves under conflicting judgment within the Federal Reserve itself, whether enough jobs are being created to justify the ending of the simulative policies of quantitative easing.
Chief Market Strategist