The big drop in claims is probably temporary

Weekly unemployment claims came in way below expectations (350K vs. 372K), but this likely has more to do with faulty seasonal adjustment factors than with any significant improvement in the labor market. On an unadjusted basis, claims actually rose by 70K, to 440K. So what happened is that the increase in actual claims—due to scheduled layoffs in the auto sector—was less than the seasonal factors expected. Actual claims were almost 15% below the level of a year ago, but there's a chance we'll see adjusted claims tick back up in a few weeks once this seasonal noise is past. Nevertheless, it remains the case that there is nothing about claims that points to any deterioration in the labor market or in the health of the economy.

As an aside, this next chart shows that as a percent of the people working, claims as of last month are fairly low when viewed from an historical perspective. Even when the economy was booming in the mid-80s, a bigger percentage of the workforce was getting laid off than today. That's not to say the economy is healthier today, but rather that there would appear to be less uncertainty today about what the future holds for those who have a job.