The Bureau of Labor Statistics reports a significant drop in its initial jobless claims this week, but there’s a catch.  The seasonally-adjusted number dropped 15,000 from the previous week, after three months of steady increases.  However, the seasonal adjustment appears to have been modified for this week’s figures (emphasis mine):

The number of U.S. workers filing new applications for unemployment insurance fell sharply last week, while the number of those on continued benefits was the lowest since December 2008, a government report showed on Thursday.

Initial claims for state unemployment benefits fell 14,000 to a seasonally adjusted 442,000 in the week ended March 20, the Labor Department said. The report included annual revisions to the weekly unemployment claims seasonal factors going back to 2005.

Using the old seasonal factors, claims would have dropped only to 453,000, a Labor Department official said.

If so, then this was only a drop of 4,000 from last week’s 457,000.  Reuters expected the number to drop to 450,000, although it’s unclear from the report whether Reuters calculated that on the older or the new seasonal adjustments.  If it’s the former, then the labor market performed worse than expected, not better.

The BLS announced that the four-week average dropped 11,000 to 453,750, thanks to the new seasonal adjustments.  Reuters proclaims success:

The decline in initial claims last week pushed them into a range that analysts reckon signals labor market stability. The labor market has lagged the economy’s recovery from its worst downturn since the 1930s, but payrolls are expected to grow this month as the government steps up hiring for the 2010 census.

Don’t pop the bubbly on the basis of this report.  Jobless claims of 450,000+ doesn’t signal labor market stability at all.  Generally speaking, that number has to get down to 300-325K in order to get to the break-even point of job creation, where the economy adds enough jobs to keep up with population growth.  That requires at least a +100K each month in net jobs, which is labor market stability.

Watch the numbers for March on April 2nd, especially the employment levels, to get the real story.  Right now it looks like BLS is applying some spin, and Reuters is buying it hook, line, and sinker.