The U.S. Labor Department is out with its weekly jobless claims and the news looks rather good on the surface. In fact, if this can be repeated for two more weeks, it is very likely that it could change estimates for nonfarm payroll creations in the coming unemployment report.

In the past week, the weekly jobless claims posted a rather big drop from 372,000 to 335,000. Here is what will really stand out: this appears to be a five-year low in jobless claims. Dow Jones was looking for a reading of about 370,000, and Bloomberg was calling for a reading of 378,000 for last week.

Note that the Labor Department said that seasonal factors and distortions likely had some influence on this very large and unexpected drop in the weekly claims. With it being so early in January, and with some sort of resolution being etched on the fiscal cliff right before the end of the year, our own take is that there could be further distortions before the real numbers settle in wherever they are going to settle.

The continuing claims, or the army of unemployed measured with a one-week lag, rose by 87,000 up to 3.21 million. With a large gain here, you have to imagine that the “distortions and seasonal” issues might really be at work.

Another measure to smooth out the weekly volatility is the four-week average. That reading fell by 6,750 to 359,250 in the past week.

Today’s news is exciting for the labor force numbers, but the caveat is that the end-of-year and start-of-year issues right after a fiscal cliff resolution of sorts may really be at work here.

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