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Economic Report: Unemployment claims fall to new pandemic low of 406,000 as layoffs wane

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The numbers: New applications for regular unemployment benefits fell in late May for the fourth week in a row as the economic recovery from the waning coronavirus pandemic induced companies to hire more workers.

Initial jobless claims sank 38,000 to 406,000 in the week ended May 22, the government said Thursday. That’s the fewest number of requests for compensation since the onset of the pandemic nearly 15 months ago.

Economists surveyed by Dow Jones and The Wall Street Journal had forecast new claims would fall to a seasonally adjusted 425,000.

New requests for compensation are down sharply from about 900,000 in early January.

The number of new applications had been running in the low 200,000s before the viral outbreak last year, however.

Read: Why aren’t Americans happier about the economy? They are paying higher prices for almost everything

Big picture: Job openings recently surged to a record high and companies say they want to hire more workers because of surging demand for their goods and services.

Yet many also complain generous unemployment benefits have discouraged people from taking jobs, an argument that has persuaded almost half of the U.S. states to end extra federal payouts starting in late June.

Read: A jobs report whodunit: The prime suspects for weak hiring gains in April

Supporters of the extra benefits counter that many people, particularly women, are still stuck having to care for children or elderly parents because of the pandemic. They warn cutting off benefits will cause more hardship and slow the recovery.

Which side is right won’t be known until the end of July at the earliest.

Whatever the case, the U.S. economy still has enough momentum to ensure fairly strong growth over the summer, analysts say.

Key details: New unemployment claims declined the most in Washington state, Florida, New Jersey, Texas and Ohio. They only state to post a sizable increase was Oklahoma.

Another 93,546 applications for jobless benefits were filed last week through a temporary federal relief program. These claims had peaked last year at well over 1 million a week but have now dwindled to a pandemic low.

The number of people already collecting state jobless benefits, meanwhile, fell by 96,000 to a seasonally adjusted 3.64 million in the week ended May 15. These are known as continuing claims.

Some 5.2 million people who have exhausted state compensation were also getting extra federal benefits. The federal program ends in September.

Altogether, the number of people reportedly receiving benefits from eight separate state and federal programs totaled 15.8 million as of May 8. These claims had topped 30 million early in the crisis.

Fewer than 2 million people were getting benefits before the pandemic erupted.

Note to readers: A government review found the number of distinct individuals collecting benefits has been inflated by fraud and double counting. Widespread fraud has also resulted in tens of billions of dollars in improper payments, a Labor Department review estimated.

What they are saying? “Fewer Americans are getting laid off as COVID-19 levels drop, and many employers are now worried about finding and keeping workers,” said corporate economist Robert Frick at Navy Federal Credit Union.

“At current rates, we should see normal claims numbers of about 200,000 weekly sometime this summer, ” he said.

Market reaction: The Dow Jones Industrial Average
DJIA,
+0.03%

and S&P 500
SPX,
+0.19%

were set to open slightly higher in Thursday trades.

Market Snapshot: U.S. stock futures mostly lower ahead of jobless claims, GDP update

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