New jobless claims plummet sharply to a 42-year low of 255,000. Continuing claims fall as well.

Auto retooling, and related temporary layoffs, is always a major wildcard for jobless claims in July and are likely at play in a startling 26,000 fall in initial claims in the July 18 week to a 42-year low of 255,000. A look at the 4-week average, which helps smooth out volatility, is less startling, down 4,000 to a 278,500 level that is little changed from the month-ago comparison.

Continuing data, where data lag by a week, also fell, down 9,000 to a new multi-year low of 2.207 million with the 4-week average down 10,000 to a 2.254 million level that is also little changed from a month ago. The unemployment rate for insured workers is steady at a very low 1.6 percent.

This report will raise talk of an upside surprise for the monthly employment for July where the sample week is the same as that for the latest initial claims data. Nevertheless, jobless claims data are hard to read at this time of year and there's no guarantee of similar strength for the monthly report.