a claims level above 400,000 will continue to push the unemploym

Initial claims broke free of its last equilibrium lower bound and dropped to 512,000 new unemployment claims for the week ending Oct. 31. Initial claims were expected to decline from 532,000 claims to 522,000 and remain within the 520,000 to 535,000 range. It's way too early to tell if the drop in initial claims represents a growing downward trend or if claims are merely looking for a new equilibrium range. In the past few months, whenever the claims level fell below its previous range analysts were quick to predict a long-term downward trajectory. Given that a long downward trend hasn't happened yet, we are leaning more on claims trying to settle somewhere between 500,000 and 525,000 for the next few weeks. That said, a claims level above 400,000 will continue to push the unemployment level higher. The market reaction to the drop in claims will be limited as the more important national unemployment numbers for October are released on Friday... Continuing claims fell from a newly revised 5.817 million workers to 5.749 million workers for the week ending Oct. 24. The drop was exactly in-line with the consensus expectation of 5.75 million workers. The drop in claims does not mean more workers are finding jobs, but is due to the unemployed running out of their unemployment insurance. Approximately 7,000 unemployed workers lose their unemployment benefits every day... The Senate just passed a new bill that would extend unemployment insurance 14 weeks for all states and 20 weeks for states with unemployment rates above 8.5%. The extension should halt the steady decline in continuing claims for the next few weeks. The House passed a similar measure about a month ago and is expected to ratify the new Senate bill. Republican lawmakers have already begun campaigning that this will be the last extension of unemployment benefits, but if the job market doesn't pick up tremendously over the next 3-4 months, there will be enormous pressure to extend benefits before the midterm primaries.