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Jobless claims plummet, reach five-year low

Going into this morning, most economists expected initial unemployment claims to improve, but after seeing the new report from the Department of Labor, few expected news this good.

New applications for U.S. unemployment benefits fell by 37,000 to a seasonally adjusted 335,000 in the week ended Jan. 12, the Labor Department said Thursday. Claims fell to the lowest level since January 2008, but the big drop likely stems from a seasonal-adjustment quirk whose effects could quickly fade and push the numbers back up in the next few weeks. Economists surveyed by MarketWatch expected claims to drop to 368,000 from last week's slightly revised 372,000.

The caveats certainly matter -- seasonal quirks don't last -- but for the record, the last time we saw a number this low, it was exactly five years ago this week.

To reiterate the point I make every Thursday morning, it's worth remembering that week-to-week results can vary widely, and it's best not to read too much significance into any one report.

In terms of metrics, when jobless claims fall below the 400,000 threshold, it's considered evidence of an improving jobs landscape, and when the number drops below 370,000, it suggests jobs are being created rather quickly. We've been below the 370,000 threshold five of the last six weeks.

Above you'll find the chart showing weekly, initial unemployment claims going back to the beginning of 2007. (Remember, unlike the monthly jobs chart, a lower number is good news.) For context, I've added an arrow to show the point at which President Obama's Recovery Act began spending money.