By Eric Morath 

New applications for unemployment benefits in the U.S. fell slightly last week but remained between 800,000 and 900,000 for the fifth straight week, reflecting a labor-market recovery that is losing momentum.

Weekly initial claims for jobless benefits fell by 36,000 to a seasonally adjusted 837,000 in the week ended Sept. 26, the Labor Department said Thursday. In a positive sign, the number of people collecting unemployment benefits through regular state programs, which cover most workers, decreased by 980,000 to about 11.8 million for the week ended Sept. 19. That was the lowest level since March.

The totals for unemployment applications and payments remain well above pre-pandemic peaks but are down significantly from this spring, when the coronavirus pandemic and related shutdowns caused both measures to rise to the highest levels on record back to the 1960s.

The level of new claims shows layoffs remain persistent in some industries. More companies announced job cuts this week, including American Airlines Group Inc. and United Airlines Holdings Inc., Allstate Corp. and Walt Disney Co.

"There are some companies that are really struggling, making permanent cuts that before we thought were temporary," said Andy Challenger, senior vice president at outplacement firm Challenger, Gray & Christmas Inc. "A lot of the cuts now are related to economic conditions, not jobs that were paused due to Covid-19."

Claims filed by workers last week don't reflect the most recent corporate announcements.

"It's a good sign that claims for state programs are coming down," Michelle Holder, a labor economist at John Jay College in New York, said. "But the recent announcements could cause a spike in claims in the near future. Whether that translates into a spike in the unemployment rate depends on the broader recovery."

Thursday's data was complicated by California pausing the processing of new claims for two weeks. State officials said last month they needed to clear a backlog of nearly 600,000 Californians who have applied for benefits more than 3 weeks earlier, and about 1 million cases where individuals received payments but subsequently modified their claim and are awaiting resolution.

The U.S. Labor Department said Thursday that this week's national report reflects California's level during the last week before the pause. Data will be revised at a later date, the government said.

The recent level of unemployment benefit applications matches with other indicators suggesting labor-market improvement is slowing.

Economists survey by The Wall Street Journal project Friday's jobs report -- which reflects the labor market in mid-September -- will show employers added 800,000 jobs from a month earlier. While that is a strong gain compared with pre-pandemic figures, it would mark the first month since April that net hiring hasn't exceeded 1 million. Employers through August replaced about 11 million jobs of the 22 million shed in March and April at the beginning of the pandemic.

Economists expect the unemployment rate ticked down to 8.2% in September from 8.4% the prior month. The rate had been falling at a faster pace in prior months from April's 14.7% peak.

Even with fresh layoffs, there are jobs available, said Becky Frankiewicz, president of staffing firm ManpowerGroup North America, who said job openings have increased since May.

"We're not back to where we were last year," she said. "But we've made dramatic progress from the middle of the crisis." She added that there has been an increase in jobs in the logistics, e-commerce and medical fields, and for those with information-technology skills.

ManpowerGroup's recent employer survey showed 20% intended to increase staff in the fourth quarter, up from 17% who intended to add staff in the third quarter. Ms. Frankiewicz said those responses likely indicate plans to hire outside candidates, rather than recall previously furloughed staff.

To attract workers, employers are increasingly allowing new hires to work remotely and have lowered job requirements in some cases, she said.

"Just because there's a lot of people unemployed doesn't mean there's a lot of people willing to come to work," Ms. Frankiewicz said, noting safety concerns and child-care challenges. "Some companies are readying themselves for an expected increase in demand."

Employment trends mirror the broader economy. Economists project the U.S. economy grew this summer, but don't expect that pace to persist into the fall.

The Labor Department's weekly unemployment benefits report provides data on regular state programs -- which have served as an economic bellwether for a half-century -- as well as details from two pandemic-specific programs first implemented in March.

The larger of those programs -- available to the self-employed, gig workers and others not typically eligible for unemployment aid -- paid benefits to about 11.8 million workers the week of Sept. 12, the Labor Department said Thursday. However, analysts are skeptical about that figure, which has trended near the number of people paid under state programs, which insures about 146 million workers. At the end of last year, there were about 10 million self-employed workers, according to the Labor Department

A second pandemic program pays 13 additional weeks of benefits to individuals who have exhausted regular unemployment benefits. Enrollment in that program rose to 1.8 million the week ended Sept. 12. That is the highest level this year and suggests that some of the decline in state-benefit recipients represents workers who have exhausted the maximum amount of payments available through those programs, which is six months in many states.

Congress also authorized federal funding for an extra $600 a week in unemployment benefits on top of amounts paid by states. Those benefits expired at the end of July. In early August President Trump issued an executive action allowing states to tap $44 billion disaster-relief funds for $300 a week in enhanced aid. States were authorized to pay up to six weeks of benefits from the week ended Aug. 1.

A Federal Emergency Management Agency spokesperson said that $41.7 billion has been distributed to 49 states and several territories. And 45 states and the District of Columbia have been awarded funds to pay all six weeks of additional benefits. South Dakota didn't apply for the funds.

Write to Eric Morath at eric.morath@wsj.com

(END) Dow Jones Newswires

October 01, 2020 11:08 ET (15:08 GMT)

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