By Eric Morath 

New applications for unemployment benefits this month fell to the lowest levels since March, when the coronavirus pandemic derailed the economy, showing a sign of improvement for the U.S. labor market.

Weekly initial claims for jobless benefits fell by 55,000 to a seasonally adjusted 787,000 in the week ended Oct. 17, the Labor Department said Thursday. Claims for the prior two weeks were revised lower, reflecting new data from California. The revised level of claims for the week ended Oct. 3 -- 767,000 -- was the lowest since the March 14 week, when less than 300,000 new claims were filed.

The Labor Department said California last week resumed reporting actual unemployment insurance claims data, which reduced the overall number of claims in October. The state had paused processing of jobless applications to address a backlog and step up fraud-prevention capabilities.

"The labor market continues to grind toward recovery," Jefferies LLC economist Thomas Simons wrote in a note to clients. Before the revisions, claims data was "hinting that the labor market had hit a pothole in its recovery. That no long seems to be the case," he wrote.

The number of people collecting unemployment benefits through regular state programs, which cover most workers, decreased by 1 million to about 8.4 million for the week ended Oct. 10, also the lowest since March. That is consistent with many employers recalling workers furloughed earlier this year, and some, such as online retailers and logistics firms, adding staff.

However, it also reflects some long-term unemployed workers losing eligibility for such programs, which typically are capped at six months or less. A separate program offering extended benefits to those affected by the pandemic exceeded 3 million this month, the highest since the program started in March.

New applications for unemployment benefits and payments still remain 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 labor market broadly had a strong, but partial, rebound this summer, regaining through September more than half the 22 million jobs lost in March and April. But the pace of those gains eased in recent months. That is consistent with economists expecting a prolonged period of slow recovery.

Most economists The Wall Street Journal surveyed earlier this month said they didn't expect the labor market to claw back all the jobs lost as a result of coronavirus-related shutdowns until 2023 or later. That was a slower timeline than economists predicted six months ago.

Companies ranging from American Airlines Group Inc. and United Airlines Holdings Inc. to Walt Disney Co. and AT&T Inc.'s WarnerMedia have announced job cuts in recent weeks, and those layoffs may have affected filed claims last week. Meanwhile, businesses such as restaurants, gyms and theaters are closing doors due to what appears to be a prolonged slump for services and products that rely on public gatherings.

"The economy has been allowed to open back up," said Alfredo A. Romero, economist at North Carolina A&T State University. "But the question remains if people will be willing to come back, to eat a restaurant or shop at a mall, especially now that the colder weather is coming and cases are rising."

Still some employers are struggling to fill job openings, said Chris Ashcraft, owner of three Express Employment Professionals staffing offices in Alabama and Georgia.

His offices have placed more than 100 workers in the past few weeks at jobs in distribution centers and automotive and seafood processing plants. Many of those jobs pay $15 an hour, he said, up from $10 or $11 an hour a year ago. The better pay reflects an effort to attract people back to the workforce who may be worried about becoming ill or have child-care challenges.

"When Covid hit, everything just stopped," he said. "But from August until now, we've been growing. It's like coming out of a recession, but even faster."

While the number of posted jobs have increased from this spring, they remain 15.3% lower than a year earlier, as of Oct. 16, according to job search site Indeed.com.

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

The largest of those programs -- available to the self-employed, gig workers and others not typically eligible for unemployment aid -- paid benefits to 10.2 million workers in the Oct. 3 week, according to the Labor Department. The pandemic figures aren't adjusted for seasonality and reported with a delay. That number exceeded those receiving benefits from state programs, 9 million on an unadjusted basis that week, which cover more than 140 million workers.

Analysts are skeptical about the figures for the new program. At the end of last year, there were about 10 million self-employed workers, according to the Labor Department.

Jeremy Terlecki, 37 years old, is among those facing a prolonged spell of unemployment. He has been receiving jobless benefits since shortly after he was laid from an engineering job in the oil-and-gas industry in Bakersfield, Calif. "Everything seemed to be going well with the economy and my job, then it changed so fast," he said. "Now jobs are difficult to find...I don't think it's going to be an immediate comeback."

Mr. Terlecki moved with his 4-year-old daughter back to his home state of Louisiana, in hopes of better job opportunities, and is living with his sister. He said employers have expressed some interest in hiring him, but he hasn't received an offer. He thinks companies are waiting until after the presidential election or even early next year before making commitments. Mr. Terlecki is considering relocating again, to Houston, if he doesn't find work soon.

"I'm trying to stay afloat but I'm paying $1,000 a month in health insurance," he said. "That hurts."

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

(END) Dow Jones Newswires

October 22, 2020 10:36 ET (14:36 GMT)

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