Jobless claims drop to 259,000, lowest since October

Economists had expected 272,000 new jobless claims in the week. Instead, they dropped to the lowest level since October, a number not seen before this year since the height of the dot-com bubble in 2000.

The four-week moving average of claims, a measure that’s less volatile than the week-to-week average, fell by 2,500 to 267,500. That, too, was the lowest since last October.

With Thursday’s numbers, jobless claims are at ultra-low levels despite signs earlier this year that they had bottomed out for the cycle and were headed up.

Investors watch jobless claims closely because the Labor Department releases them weekly, providing a leading indicator of the health of the economy. Lower claims suggest fewer layoffs and a stronger labor market.

Thursday’s report will reassure economists concerned about the possibility of a recession later this year.

Claims are way below the 300,000 to 325,000 level that economists have pinpointed as the number that would entail a rising unemployment rate. And it’s now been over a year since claims have hit the 300,000 mark.

Net job growth has also been relatively strong recently, with the economy adding 228,000 new payroll jobs on average in the past three months.

With the labor market strong, the Federal Reserve is likely to worry less about other economic indicators that have raised recession fears at different points this year, such as the turbulent stock market and measures of industrial production.

Thursday’s jobless claims numbers are the last ones members of the central bank will see before they meet in Washington, D.C. next week to decide on interest rate policy. After a historic quarter-percentage point rate target increase in December, the Fed is expected to hold off on further moves this month.

The Labor Department said that the claims numbers, which are adjusted for seasonal variations, were not affected by any special factors in the week.