Unemployment claims hit new pandemic low of 406,000

Weekly initial unemployment claims continued their steady downward trend in the third week of May, hitting a new pandemic low of a seasonally adjusted 406,000, a drop of 38,000, or 8.6 percent, from the previous week.

While the claims remain well above historical averages, the new total was better than the 425,000 claims economists expected, and points to a steadily recovering labor market.

The growing level of vaccinations has brought daily cases of COVID-19, hospitalizations and deaths down dramatically in recent weeks, allowing local and state governments to ease restrictions and giving people renewed confidence to leave their houses and spend money.

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Thursday's report had other sunny spots as well, including a continued drop in claims through emergency unemployment programs set up for the pandemic. Pandemic Unemployment Assistance, which offers benefits to gig workers and the self-employed, dropped to 93,546 claims, only the second time it was below 100,000 since the pandemic began.

Amid the earliest pandemic restrictions at the same time last year, the program had over 1.3 million claims.

The number of continuing claims, which lags by two weeks, fell to 15.8 million in the latest report from about 16 million the previous week.

Nearly two-thirds of the continuing claims came from two emergency programs that are expected to run dry in September.

Robert Frick, a corporate economist at Navy Federal Credit Union, said the steady drops in weekly claims had become a high point in an otherwise unsteady labor recovery.

"Fewer Americans are getting laid off as COVID-19 levels drop, and many employers are now worried about finding and keeping workers," he said, adding that weekly claims could return to normal levels of around 200,000 this summer.

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"While this helps total employment, based on supply chain and other issues, we will likely see volatility in jobs numbers at least until the fall," he said.

All eyes will be on the Labor Department's next monthly jobs report, which is scheduled for release next Friday. The last report came in surprisingly weak, showing just 266,000 new jobs added to the economy despite expectations of around 1 million.

--Updated at 9:42 a.m.