Hope for US economy as unemployment claims hit lowest level since pandemic began

US applications for unemployment benefits fell more than expected last week to the lowest since the pandemic began, in a broad decline across most states, suggesting the labour market is improving.

Initial jobless claims in regular state programmes fell by 249,000 to 1.19 million in the week ended August 1, Labour Department data showed yesterday.

The median forecast in a Bloomberg survey of economists called for 1.4 million. Stock futures erased earlier declines after the figures.

Continuing claims – the total number of Americans claiming ongoing unemployment benefits in those programmes – 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 full recovery.

“Today’s numbers were a very welcome development as [they show] that the improvement in the overall job market seems to be back on track,” said Russell Price, senior economist at Ameriprise Financial.

Politicians are still working towards a stimulus package that would once again bolster the size of millions of Americans’ unemployment cheques, but in the meantime, the extra $600 (Dh2,203) 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-claim flows still exceed the [highs of the] Great Recession by 78 per cent, and we expect net payroll growth [to be] flattened significantly in July.”

Data released on Wednesday by the ADP Research Institute showed that recruitment at US companies remained positive in July.

However, the pace of job growth slowed sharply, with some industries such as the financial sector even registering 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 non-farm 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 extended to them under the wage protection programme.