U.S. initial jobless claims head lower

The number of Americans filing for initial unemployment benefits dropped sharply last week, a sign layoffs are slowing but not enough tosuggest many new jobs are being created.

The Labour Department said Thursday that requests for jobless aid dropped by 21,000 to a seasonally adjusted 454,000.

The drop erases the increases of the previous two months and takes the number of initial claims to its lowest levelsince early May.

The four-week moving average fell to 466,000, a drop of 1,250 from the previous week.Economists pay closer attention to the four-week figures because it smooths out fluctuations. Analysts say a figure of around 400,000 would suggest new job growth.

The number of first-time claimants is dropping, but the totalnumber of unemployed people receiving benefits is declining sharply because their aid is ending.

About 350,000 people saw their benefits cut off in the week of June 19 after Congress left for a week-long recess without extending federal jobless aid. That brings the total to about 1.6 million people who have had their benefits end since May. Those numbers could reach 3.3 million by the end of the month if Congress doesn't pass an extension when it returns from recess.

Jobless figure unstable

The jobless figure has been especially volatile in recent weeks.

The initial figure has hovered around 450,000 for most of 2010, after dropping steadily last year from a peak of 651,000 in March 2009.

The total number of people claiming benefits plunged by 224,000 to 4.4 million. But that doesn't include another 4.6 million people who received extended benefits paid for by the federal government in the week ended June 19, the latest data available.

As the economic crisis unfolded through 2008 and 2009, Congress repeatedly passed emergency extensions to benefits payment periods, adding up to 73 weeks of extra benefits on top of the 26 weeks typically provided by states.

But those extensions expired in late May, leaving about 1.6 million people without unemployment insurance, according to the Labour Department.

Unless lawmakers extend them again, that figure is expected to grow to 3.3 million by the end of this month.