The weekly unemployment claims report from the Labor Department on Thursday, the most timely data on the economy’s health, also showed the number of people on state jobless rolls dropped in early August to levels last seen in mid-March 2020, when the economy almost ground to a halt amid mandatory business closures aimed at slowing the first wave of COVID-19 cases.
“A healthy drop in unemployment claims is the latest evidence the rise of the Delta variant isn’t having a significant effect on the economy,” said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia. “We can infer that hiring remains strong in August, pointing to a healthy jobs report for this month.”
Initial claims for state unemployment benefits fell 29,000 to a seasonally adjusted 348,000 for the week ended Aug. 14. The fourth straight weekly decline pushed claims to their lowest level since mid-March 2020.
Data for the prior week was revised to show 2,000 more application received than previously reported. Economists polled by Reuters had forecast 363,000 applications for the latest week. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility dropped 19,000 to 377,750, also a 17-month low.
Last week’s decrease in filings was led by Texas. There were also notable declines in Illinois, Kentucky and Michigan.
Claims have declined from a record 6.149 million in early April 2020, but they remain above the 200,000-250,000 range that is seen as consistent with healthy labor market conditions.
Claims have been grinding lower, with employers hanging on to their workers amid a labor shortage as vaccinations allow the economy to fully reopen. More than half of the population has been fully immunized against COVID-19.
U.S. stock index futures were little changed. The dollar rose against a basket of currencies. U.S. Treasury prices rose.
Good Omen for Hiring
The claims data covered the period that the government surveyed business establishments for the nonfarm payrolls portion of August’s closely watched employment report. With claims below 400,000, payrolls growth likely remained strong after the economy created a whopping 943,000 jobs in July.
But COVID-19 infections are surging, driven by the Delta variant of the coronavirus. While economists do not expect large-scale business shutdowns as happened early in the pandemic, there are worries that soaring cases could keep some unemployed people at home, especially if children are unable to attend schools in person.
Lack of childcare facilities and fears of contracting the virus have been blamed for worker shortages, which are partly contributing to employment remaining 5.7 million jobs below its peak in February 2020. There were a record 10.1 million job openings as of the end of June.
About 8.7 million people were officially unemployed in July. The economy fully recovered in the second quarter the sharp loss in output suffered during the very brief pandemic recession.
The claims report also showed the number of people continuing to receive benefits after an initial week of aid tumbled 79,000 to 2.820 million in the week ended Aug. 7, the lowest level since mid-March 2020.
Data next week on the so-called continuing claims will offer more clues on how hiring fared in August. Continuing claims are reported with a one-week lag and are a good barometer of hiring.
At least 25 states led by Republican governors have pulled out of federal government-funded unemployment programs, including a $300 weekly payment, which businesses claimed were encouraging unemployed Americans to stay at home. There is, however, no evidence that the early termination of federal benefits has led to an increase in hiring in these states.
“For the most part, there has not been a noticeable difference in continuing claims in states that ended federal expanded unemployment benefits programs early and those that did not,” said Veronica Clark, an economist at Citigroup in New York. “We still see signs that labor shortages might not be quickly resolved as unemployment benefits end.”
The government-funded benefits will expire on Sept. 6.
