US jobless claims dip to new pandemic low as vaccines pay off
Help wanted sign (AFP Photo/Joe Raedle)

New applications for jobless aid in the United States dropped below 500,000 last week for the first time since the pandemic began as Covid-19 vaccines helped businesses rehire.

The Labor Department reported on Thursday that there were 498,000 seasonally adjusted initial claims for jobless benefits made in the week ended May 1. That is 92,000 fewer than the week prior and a sharper drop than forecast, bringing the closely watched metric of the labor force to a new low after it spiked when the Covid-19 pandemic began in March 2020.

The report provides the latest evidence that coronavirus vaccination campaigns and government stimulus spending are aiding the US labor force, which is still short millions of jobs lost to the business restrictions meant to stop the virus from spreading.

"The level remains high, but filings are moving in the right direction, indicative of improving labor market conditions," Rubeela Farooqi of High Frequency Economics said.

Claims have been on a downward slope over the last month, and a closer look at just how much rehiring has occurred will come on Friday when the Labor Department releases its employment report for the month

Further declines ahead

It hasn't been an entirely smooth ride. The Labor Department revised total claims filed as of the week ended April 24 upwards, indicating applications rose that week by 24,000.

And in the latest week, there were 101,214 new applications, not seasonally adjusted, filed under a special program to help freelance workers who are not eligible for regular jobless benefits, the report said, about 20,000 less than the week before.

All told, nearly 16.2 million people were claiming some form of unemployment benefits as of the week ended April 17, the Labor Department said, a reminder that much remains to be done to restore the record-low unemployment seen before the pandemic.

Nancy Vanden Houten of Oxford Economics nonetheless called last week's data "further confirmation that a recovery in the labor market is well underway."

Weekly jobless filings spiked into the millions after states ordered businesses to close or modify operations as the pandemic began, and while they dropped throughout 2020, they remained in the high hundreds of thousands-range for months.

The current downward trend began in early April as Covid-19 vaccinations became more common and states began rolling back restrictions, spurring businesses to rehire.

That pushed the unemployment rate down to six percent in March as the economy added 916,000 jobs, and economists expect a gain of one million positions in April, with the jobless rate falling slightly.

Ian Shepherdson of Pantheon Macroeconomics predicted claims would edge lower as vaccinations continue and major states target a full reopening of businesses in the months ahead.

"Given the tightness of the labor market, as reported in business surveys, we expect claims to fall for the foreseeable future, with sub-300,000 a reasonable objective for the summer," he said in an analysis.