updated 10/16/2008 6:18:45 PM ET 2008-10-16T22:18:45

Initial jobless claims dropped last week by 16,000 to 461,000, the government said Thursday, and that's good — but they're still high by historical standards, which is bad.

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So, which is it?

Here are some questions and answers about jobless claims — a figure that many economists consider a timely indicator of the economy's direction:

Q: What does this week's number tell us?

A: That the labor market is in fairly bad shape. Economists generally consider claims above 400,000 to be a sign of a recession. They've come in above that level for 13 straight weeks.

Two weeks ago, initial claims stood at a revised level of 499,000, the highest since just after the Sept. 11 attacks and the second-highest since 1992. The four-week average is at a seven-year high of 483,250.

Q: How high has the number been in the past?

A: Jobless claims regularly topped 600,000 during the 1982 recession, when the labor force was about one-third smaller than it is now. So things have certainly been worse.

Conversely, they frequently dipped below 300,000 during the "New Economy" boom times in 1999.

Q: What precisely are jobless claims?

A: Reported by the Labor Department each Thursday, the figure is the number of people who have filed new applications for unemployment benefits in the previous week, based on information provided by the states. It's a particularly up-to-date snapshot of the economy, since it only measures the number of people who've just lost their jobs.

Only people laid off through no fault of their own can receive unemployment benefits, meaning that people who were fired or quit because they got sick of their boss aren't included.

Employers typically pay unemployment insurance taxes, so some self-employed workers and contractors also may not be eligible if they haven't paid into the system.

Q: So the figure fell in the last two weeks even as the financial meltdown got worse?

A: Some of the drop is due to the fading impact of Hurricanes Gustav and Ike, which boosted total claims by as much as 50,000 four weeks ago but added only about 12,000 last week.

Also, remember that the figures are for initial claims. More than 3.7 million Americans are continuing to receive unemployment benefits, a five-year high. Benefits last for up to 26 weeks.

In June, Congress approved an emergency extension of coverage for another 13 weeks. The department said Thursday that 1.35 million people — who have already run through their regular benefits — sought extended benefits in the week ending Sept. 27.

Q: So there are more than 5 million people unemployed right now?

A: That's just the number receiving unemployment benefits. There were roughly 9.5 million Americans out of work last month, according to the Labor Department, out of a work force of 154.7 million people. That gives you September's unemployment rate of 6.1 percent.

Another 1.6 million people are out of work but haven't looked for a job in the past four weeks, according to the department. They aren't counted in the unemployment rate.

Q: Has the financial meltdown made things worse?

A: Yes, but keep in mind that companies have cut jobs all year long as the housing slump weakened the economy.

Banks and investment firms have laid off thousands of employees recently and more cuts are likely. Citigroup eliminated 11,000 jobs during the third quarter, bringing its total head-count reduction so far this year to 23,000.

The financial services industry cut 17,000 jobs in September, the Labor Department said earlier this month.

Q: Are there formerly high-paid Wall Street bankers now getting unemployment?

A: Probably, though there's no way to know for sure. They might find it hard to get by on New York State's top unemployment benefit of $405 per week, before taxes. (Yes, unemployment benefits are taxed.) Though if they commute from neighboring Connecticut, unemployed Wall Streeters can collect up to $576 per week.

States set unemployment benefit amounts. But around the country, the benefits on average replace about 35 percent of the pay unemployed workers previously earned, the Labor Department says.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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