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Jobless Claims Break Below 300,000 to Lowest Level Since July

The number of Americans filing new claims for jobless benefits plunged a larger-than-expected 26,000 last week to its lowest level in more than five months, a government report showed.

Initial filings for state unemployment insurance aid fell to 299,000 in the week ended Jan. 6 from a revised 325,000 for the previous week and to its lowest since a matching 299,000 in
July 2006, the Labor Department said.

U.S. government bond prices extended losses after the data signaled the labor market was surprisingly resilient and the 10-year Treasury note's yield rose to a two-month high. But analysts pointed out that claims data tend to be difficult to read during the holiday period at the turn of the year.

"Obviously it's a strong number, but you have to kind of couch it against the fact that there is some seasonal noise that influences it and also the unseasonably warm weather also had an impact," said George Goncalves, treasury and agency trading strategist for Banc of America in New York.

"I think people are trying to come to terms with what it really means (to have) a sub-300 number," Goncalves said. "It's coming at a time when you had a strong nonfarm payrolls a week earlier."

A Labor Department analyst said there were no special factors behind the sharp drop but noted seasonal adjustment of data is particularly hard through the holiday season.

The drop in new claims came during a holiday-shortened work week that included New Year's Day and a national day of mourning for the funeral of former President Gerald Ford.

Jobless claims are at a level economists see as consistent with the solid pace of employment growth. Last week, a Labor Department report showed job growth surprisingly strong in December with the economy generating 167,000 jobs.

Analysts on Wall Street had expected claims, which provide a rough guide to the pace of layoffs, to fall to 324,000 from the 329,000 initially reported for the Dec. 30 week.

A four-week moving average of claims, which smoothes weekly volatility to provide a better sense of underlying job-market trends, also fell, dropping to 314,750 from 316,500 in the prior week.

The total number of unemployed still on the benefit rolls after drawing an initial week of aid dropped for the second straight week.

So-called continued claims edged down 3,000 to 2.43 million in the week ended Dec. 30, the latest period for which figures are available.