Jobs Numbers Good, but Still Not Good Enough

Despite a fairly dramatic recent decline in weekly unemployment claims, the notion of a significantly improving job market is drawing few converts.

The Labor Department dropped another surprise Thursday on Wall Street with news that the total of new jobless claims fell by 5,000 to 330,000, a release that came against expectations that last week's tumble to 335,000 was a statistical blip.

Not only was this week's total well below economist estimates of 360,000, but there also was no revision from the previous number. The government routinely fiddles with its data as more information flows in. (Read More: Weekly Jobless Claims Keep Up Steady Move Lower)

Still, the Street remained tepid at best and disbelievers at worst.

"We are cautious not to read too much into the recent sharp drop in claims as the data have in the past been distorted around the beginning of the year," said Joe LaVorgna, chief US economist at Deutsche Bank. "However, the fact that the four-week moving average has been steadily declining over the past three weeks could be a signal that the labor market is poised to up shift."

"This is mostly noise not a signal. The move last week and this week are biased on the low side due to seasonal factors," Stephen Staley, chief economist at Pierpoint Securities, said in a more pointed analysis. "They will likely pop back up."

David Paul Morris | Bloomberg | Getty Images

Weekly claims are significant on a number of levels.

Strategists such as Jim O'Neill at Goldman Sachs Asset Management prefer to watch the claims numbers than the monthly nonfarm payrolls count, which determines the official unemployment rate. The weekly number is more of an actual count than the monthly report, which relies on guesstimates and models in its calculations.

Consequently, the weekly numbers go a long way toward determining economist views on the labor picture, and their monthly forecast for the payrolls number.

LaVorgna said the improvement in claims does not change his outlook that the economy will create about 170,000 jobs in January and the unemployment rate will hold at 7.8 percent. (Read More: What Will It Take to Get the Fed to Stop Easing?)

That seems to be the prevailing view, with most economists believing the jobs picture has stabilized but has yet to show the type of improvement that would bring down the rate.

"These latest readings are potentially encouraging signals for the labor market, but the claims data can be distorted around the turn of the year because of issues seasonally adjusting the data associated with various holidays," said Daniel Silver, economist at JPMorgan Chase. "While the trend in claims appears to be improving to some degree, the low levels of claims from the most recent two weeks likely overstate the underlying improvement in the labor market."

Continued improvement in claims, though, could push the issue and force economists into changing their views.

"The surprising dip in the level of weekly claims brings the four-week moving average towards the 350,000 line in the sand that we consider that point below which the unemployment rate will start to make further declines," said Andrew Wilkinson, chief economist strategist at Miller Tabak. "We continue to argue that the labor market is on the verge of snapping back and as such the gradual declines in the initial claims readings support that view."

-Reuters contributed to this report.

-By's Jeff Cox