(Reuters) - NEW YORK (Reuters) - New claims for unemployment benefits dropped to a 3-1/2 year low last week, a government report showed on Thursday, suggesting the labor market recovery was gaining speed.
"The New York Fed's Empire State Manufacturing Survey jumped almost nine points, from +0.61 to +9.53, giving it its strongest reading since May. Internals were fairly strong as well, perhaps in part driven by further recovery from supply chain troubles caused by flooding in Thailand, which had been plaguing automakers and computer parts manufacturers....The Empire State reading had been underperforming other regional and national manufacturing surveys over the last couple of months, but this month it looks to be making a bid for rejoining the middle of the pack. These series can be volatile, however, so we'll see if the Philly Fed's Business Outlook Survey at 10:00 today echoes the strength in the NY Fed District."
"Initial claims data surprised sharply to the downside in the week to December 10, falling by 19k to 366k, the lowest level since May 31 2008. The market had expected a modest increase to 390k, with last week's number revised up to 385k from 381k. Even with the upward revision we now have 2 straight declines of 19k, hinting that we could see a welcome pick up in December's payroll, which will be surveyed next week.
"The Labor Dep't saw no unusual factors behind the latest decline. In fact before seasonal adjustment claims fell by a steep 96k, to 433k, with last week's number having seen a seasonal bounce from a week when unadjusted claims were restrained by the Thanksgiving holiday. Claims can be volatile at this time of the year given difficulties in holiday seasonal adjustments, but the 2 straight sharp declines is certainly significant and welcome. The 4 week average fell to 387.75k, its lowest since July 12 2008.
"Continuing claims did see an increase for the latest data covering the week to December 3, but only by 4k, to 3.603 mln. Coming after a 158k decline in the preceding week the trend is showing the same improvement that can be seen from initial claims. The outcome is lower than a market consensus of 3.63 mln, even with the preceding week revised up to 3.599 mln from 3.583 mln. The 4 week continuing claims average of 3.66625 mln is the lowest since October 11 2008.
"With initial claims at their lowest levels since before the peak of the financial crisis encouragement can be taken from this report, though the news is less positive from emergency claims and extended benefits for the week to November 26, surging respectively by 255k and 78k, to 3.049 mln and 593k. These numbers are however not seasonally adjusted.
Unadjusted data tends to rise as winter sets in (this week's initial claims seasonal factor being an exception to this rule). Increasingly favorable seasonal adjustments could assist continued improvements in the adjusted data in the weeks ahead."