"CNN Money:  The number of newly unemployed seeking jobless benefits fell more sharply than expected last week, taking a key reading to its lowest level in more than four years, the government reported Thursday.

There were 350,000 filing for initial jobless claims in the week, down from the 362,000 who sought assistance a week earlier. Economists surveyed by Briefing.com had forecast 375,000 would be seeking help last week.

The four-week moving average, which economists prefer to look at since it smooths out the volatility in the weekly numbers, fell by 11,250 to 356,750 last week, as a spike in claims in the wake of Super storm Sandy faded into the background and the labor market continues to show signs of improvement.

That four-week average is now at the lowest reading since the week that ended March 15, 2008, shortly after the start of the Great Recession. The average over the course of 2012 has been about 375,000 a week seeking help."

This was the read on the initial jobless claims report for the week of December 22, 2012.  The commentary, for quite some time now, is that improving jobless claims are a sign that the job market, and subsequently the economy as a whole, is improving.  While it is true that employment has recovered since the post-recession lows - the report sparked the following question.

"Are initial jobless claims are falling due to the creation of full-time employment OR is it simply a function of lower levels of employment terminations?"

Since an individual can theoretically only file for a jobless claim if they have been laid-off, or terminated, from their employment it is possible that claims will fall as a function of lower terminations.  The chart below shows the 4-month average "layoffs and discharges" overlaid against total civilian employment as measured by the Bureau of Labor Statistics (BLS).  

The chart goes to confirm my suspicion that corporations have likely reached their minimum employment levels to maintain current production levels.  This is a contributing factor to lower levels of initial jobless claims.   

However, just having fewer people terminated, and subsequently filing for a welfare program, does not answer the question related to whether or not the fall in claims is leading to full-time employment.  In order for the economy to begin organically growing (meaning without the artificial supports to the financial system and housing markets through government intervention) it will require an increase not just in the number of people working - but an increase in full-time employment to reduce welfare dependency and increase incomes.  This was addressed in the King Report this morning:

"There are roughly 127 million people who receive government transfers or benefits. Sixty-one million recipients of Social Security and Medicare and 66 million people receiving welfare (SNAP food stamps, housing credits, Medicaid, etc.) Since there are about 115 million full-time jobs in the U.S., this means there are 1.1 government dependents for every full-time worker in the U.S.

(For context, there are 315 million Americans and roughly 142 million jobs. About 38 million of these jobs are part-time that pay less than $10,000 annually. Fifty million wage earners earn less than $15,000 a year, and 61 million earn less than $20,000 annually.)

The Federal government counts a person who is self-employed and earns $100 a year as 'employed' and a person who works one hour a week as 'employed.' As a result, the only meaningful metric is full-time employment...Real household income has declined almost 10% since 2000."

This brings us to the chart of the day which compares initial jobless claims (inverted scale) to full-time employees relative to the population.  While the media has spun the idea that current levels of initial jobless claims are supportive of a strengthening economy - the reality is that full-time employment remains stymied near its lowest levels on record.  Low levels of full-time employment keeps incomes suppressed, and dependency on government support programs high, which are not supportive to stronger economic growth rates.

There are two observations from this chart.  The first is that initial jobless claims have generally peaked around 310,000 weekly claims just prior to the onset of the next recession.  With claims currently hovering around 350,000 it should be expected that claims will improve more substantially in the months ahead as terminations continue to stagnate at lower levels.

The second is that historically full-time employment has markedly improved in conjunction with the drop in jobless claims.  This has not occurred this time as temporary hires have maintained preference over full-time employment.  The threat of higher healthcare costs, more than 5000 new potential regulations and increased taxes have kept businesses on the defensive resulting in lower wages, as discussed yesterday, and very lean employment.

While the decline in initial jobless claims from a historical perspective should be a positive for economic growth in the future - it is likely to only be the case if employers began to convert part-time employees to full-time hires.  This has been the hope since the end of the "Great Recession" yet subpar economic growth, increased productivity and weak consumer demand has kept businesses on the defensive to maintain profitability.  The disappointment, from an economic standpoint, is that jobless claims could well hit much lower levels without a translation into stronger economic growth or significantly increased incomes.