US reports a drop in jobless claims. Is this the beginning of something?

In a glimmer of good economic news, the Department of Labor reported on Thursday that the initial claims for unemployment dropped to 398,000 for the week ending July 16.

This is the first time in 15 weeks claims have dipped below the 400,000 level, a benchmark many economists use to gauge the health of the labor market.

A broader measure of unemployment claims, the four week moving average fell to 414,000 and continuing claims also dropped to 3.70 million from 3.72 million.

Some economists interpreted the falling claims numbers as an indication the economy has finally started to move away from the soft spot it appeared to hit in late spring and early summer. This would mesh with the consensus economic view that economic performance will start to improve in the second half of the year.

“What these numbers seem to be saying is that the decline in the economy has stopped,” says Joel Naroff of Naroff Economic Advisors in Holland, Pa. “The question is do we go anywhere from here?”

On Friday, the government will release its first estimate of second quarter Gross Domestic Product (GDP). Early estimates are that it will show the economy growing in the vicinity of 1.3 percent to 1.6 percent on a seasonally adjusted annual rate. This would reflect some of the softer economic data.

Even though the new claims numbers are better, Mr. Naroff says he is worried about the rising price of gasoline. The price of fuel at the pump has risen about 15 cents a gallon in the last month, according to AAA.

“The only way we get any recovery is if gasoline prices come down and the fact they are moving in the wrong direction is the real concern,” says Naroff.

Economist Bob Brusca of Fact and Opinion Economics in New York says the improved claims numbers need to be backed up by other data to indicate an improving economy. For example, on Wednesday, the government reported a sharp drop in durable goods orders in June. At the same time, in a sign of global slowing, he says ocean shipping rates are now down 9 percent from last April.

“It’s hard to understand why the labor market could be recovering when other things are not,” says Mr. Brusca. “The claims numbers lack the context of good news in other sectors to give it the air of authenticity.”

Economists may get a better view of the jobs market next Friday when the Labor Department releases the July unemployment numbers. Barclay’s Capital in an analysis on Thursday said it expects job growth to be a modest 50,000 gain after state and local governments shed 25,000 more workers. The unemployment rate will remain 9.2 percent, it forecast.