U.S. applications for unemployment benefits fell more than expected last week to the lowest since the pandemic started, in a broad decline across nearly all states, suggesting the labor market is improving.
Initial jobless claims in regular state programs fell by 249,000 to 1.19 million in the week ended August 1, Labor Department data showed Thursday. The median forecast in a Bloomberg survey of economists called for 1.4 million.
Continuing claims -- the total number of Americans claiming ongoing unemployment benefits in those programs -- decreased by 844,000 to 16.1 million in the week ended July 25, compared with a median projection of 16.9 million.
The drop in those applying for jobless benefits was the largest in almost two months, a welcome improvement after weeks of plateauing at elevated levels. With claims still exceeding a million on a weekly basis, the job market has a long road to fully recovering.
“Today’s numbers were a very welcome development as it shows that the improvement in the overall job market seems to be back on track,” said Russell Price, senior economist at Ameriprise Financial Inc.
Lawmakers are still working toward a stimulus package that would once again bolster the size of millions of Americans’ unemployment checks, but in the meantime, the extra $600 that has helped keep incomes and spending afloat in recent months has expired.
“Drops in both initial and continuing claims filings are welcome news after several weeks of stalled improvement," said Bloomberg economist Andrew Husby. "Congress coming to an agreement on an unemployment-benefits extension is no less urgent; initial-claims flows still exceed the Great Recession high by 78%, and we expect net payroll growth flattened significantly in July (500k).”
Data out Wednesday from the ADP Research Institute showed hiring at U.S. companies remained positive in July, but the pace of job growth slowed sharply, with some industries, like financial activities, even seeing small declines. The monthly jobs report on Friday is expected to show a similar picture, with the median estimate calling for a 1.5 million monthly increase in nonfarm payrolls after a 4.8 million surge in June.
Despite the improvement in claims, the picture could deteriorate in the coming weeks and months as businesses exhaust funds from the Paycheck Protection Program. One survey showed one-fifth of small companies are planning to dismiss workers or have already done so after using up their PPP loans. Another showed about one in four workers hired back thanks to PPP were told by their employer they may be fired again.
Stocks were little changed at the open amid an uncertain outlook for Congress to approve more relief.