US jobless claims below 1 million for the first time in pandemic

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The number of Americans applying for state unemployment benefits fell below 1 million for the first time since the pandemic began in March, suggesting the economic recovery is gaining some traction amid a deceleration in coronavirus infections.

Initial jobless claims in regular state programs fell by 228 000 to 963 000 in the week ended 8 August Labour Department data showed Thursday. Continuing claims - the total number of Americans claiming ongoing benefits in state programs - decreased to 15.5 million in the week ended Aug. 1, the lowest since early April.

Economists were expecting initial claims of 1.1 million and continuing claims of 15.8 million, based on median estimates. Both figures remain well above the highs reached during the last economic downturn.

The bigger-than-expected drops in claims follow an ebbing in new coronavirus cases, underlining how important controlling the virus is to an economy that remains well below pre-crisis measures in most respects. The decline potentially supports the argument by some businesses and Republicans that the $600 supplemental weekly jobless benefit - which expired in July - was keeping people from returning to work. That could reduce the pressure on the White House and lawmakers to agree on a new stimulus package.

At the same time, other high-frequency indicators, such as credit-card spending, show a gradual or stalled economic rebound. With unemployment above 10% in July, the labour market still faces challenges including a high level of virus cases and widespread business closures and bankruptcies, as well as online learning that’s forcing Americans to take care of their children at home.

"It’s clear that the pace of layoffs is beginning to moderate, but it’s still an enormous number of people filing for unemployment insurance benefits," said Ryan Sweet, head of monetary policy research at Moody’s Analytics. "One concern for both the job market and the broader economy is the lack of urgency in passing another round of fiscal stimulus. The economy needs more fiscal stimulus."

What Bloomberg’s economists say

The favorable direction of travel still leaves the job market well short of a healthy destination. Flows out of employment are consistent with the deepest post-war recessions. The effects of shadow joblessness - labour force exits - and long-term unemployment will persist for an extended period.

- Andrew Husby

US stocks were mixed at the open, a day after the S&P 500 benchmark closed within 0.2% of its all-time high.

The latest declines in initial claims spanned states where coronavirus cases had bloomed in prior weeks, such as California and Florida, as well as New York, where counts have remained low. On an unadjusted basis, initial claims had already dropped below 1 million the prior week, and last week fell about 156,000 to 832,000.

President Donald Trump last weekend authorised the payment of $300 a week in federal aid to unemployed Americans, smaller than the $600 benefit that expired in July -- and limited by funds that could run out within two months.

States can choose to bolster that $300 with additional $100, but the Labour Department clarified on Wednesday that the $100 can consist of regular benefits already paid by states. The legality and effectiveness of the move, along with a four-month deferral of payroll taxes, remains unclear.

In addition to applications for benefits in regular state programs, states reported 488,622 initial claims for Pandemic Unemployment Assistance, or PUA, in the week ended Aug. 8. That’s the federal program offering jobless benefits to those who don’t qualify for the state program, such as the self-employed and gig workers.

The total number of people claiming benefits in all programs decreased to 28.3 million in the week ended July 25, though this figure likely still reflects states’ overcounts of reported PUA continued claims. Still, it’s the lowest in almost three months.

-With assistance from Jordan Yadoo, Edith Moy, Reade Pickert, Sophie Caronello, Maeve Sheehey and Claire Ballentine.

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