By Eric Morath 

The jobs market appears to be returning to growth, with new applications for unemployment benefits falling to the lowest level since November amid other signs hiring is picking up.

Initial weekly unemployment claims decreased by 111,000 to a seasonally adjusted 730,000 last week, the Labor Department said Thursday. It was also the biggest drop in new applications for regular state programs since last summer.

The latest figures came as storms disrupted business in parts of the country and at least one state is adjusting for attempted fraud filings, factors that could have affected the totals. Still, weekly claims have dropped significantly since an early January peak above 900,000 and the four-week moving average, which smooths out volatility in the weekly figures, dropped to 807,750.

"It was a big drop, but I think the trend is going to continue because people are going out and spending more," said Michelle Holder, a Ph.D. labor economist at John Jay College in New York. The decrease in jobless applications is consistent with vaccination efforts giving Americans confidence the pandemic will end and signs that hiring is picking up, she said.

The recent level of applications is well down a peak of near seven million last spring. After trending down for months, claims edged higher earlier in the winter.

If the latest data signals a renewed descent, weekly claims could fall below the pre-pandemic weekly record of 695,000 set in 1982 in the coming weeks. That would suggest the economic recovery is poised to accelerate after a winter chill, during which hiring stalled.

However, there are reasons to look skeptically at the latest claims data. Two states, California and Ohio, which have both faced a high number of fraudulent claims, accounted for three-quarters of the last week's total decrease, on a nonseasonally adjusted basis.

The Ohio Department of Job and Family Services said at least 29,000 of the roughly 100,000 initial claims reported last week have been flagged for potential fraud. The level of reported fraud was down from 44,000 and 33,000 the previous two weeks, but remains elevated.

"Economic indicators, such as layoff notices from employers and the state's unemployment rate, paint quite a different picture of Ohio's economic situation than the recent weekly initial unemployment claim numbers," Ohio agency spokesman Tom Betti said. He said the agency believes criminal activity is increasing the volume of claims and that it is implementing new fraud detection measures.

Also, winter storms that hit Texas and elsewhere could affect layoff trends in the short term. The storms, which caused widespread power outages and disruptions, could create temporary unemployment for some workers and may have made it difficult for people to file claims and for state governments to process them. Claims in Texas fell last week, but some economists say that could have reflected difficulty in filing for benefits.

Ultimate Kronos Group, a workplace software firm, said the number of shifts worked by employees across the U.S. fell last week, led by a 58.5% drop in Mississippi and nearly 50% declines in Texas and Louisiana. "With severe weather events, we typically see a short-term uptick in layoffs that corrects itself within a few weeks," UKG Vice President Dave Gilbertson said.

More broadly, economists expect faster economic and job growth later this year, with those surveyed by The Wall Street Journal projecting employers to add 4.8 million jobs in 2021.

And there are signs that economic activity is poised to pick up as Covid-19 cases fall, more people become vaccinated, more government stimulus reaches households, and businesses and states lift restrictions.

The number of job openings at the end of January exceeded year-earlier levels, according to job search site Indeed.com. Aided by a fresh round of stimulus, retail spending accelerated in January.

Demand for long-lasting manufactured goods jumped in January, in part from a pronounced gain in aircraft orders, as U.S. manufacturers continued a steady recovery from the pandemic, the Commerce Department said. That was the ninth straight month of gains and the largest percentage increase since July 2020. The Commerce Department also revised up its reading of fourth-quarter economic growth to an annual rate of 4.1%, seasonally and inflation adjusted, versus the prior estimate of 4.0%.

"We know really fast job growth is coming as soon as some of these industries -- hospitality, entertainment and travel -- can get going again," said Andy Challenger, senior vice president at outplacement firm Challenger, Gray & Christmas.

In addition to regular state benefits, the Labor Department reports the number of people enrolled in two special pandemic programs: one for self-employed and gig workers, and another for those who exhausted other forms of the benefits.

The combined number of ongoing claims filed for those two programs rose for the week ended Feb. 6, and the total number people estimated to be receiving benefits was more than 19 million, the Labor Department said. A year earlier the figure was 2.1 million.

"The improving labor market is cold comfort for those who have lost their jobs and can expect to be unemployed for some time," Dr. Holder said. She added that some people on unemployment rolls are likely there because they believe it isn't safe to go back to work. With President Biden recently signaling those with safety concerns can continue to receive payments, Dr. Holder expects the level of benefit recipients to remain high.

Margaret Grosso, 75 years old, has been out of work for more than a year and has been receiving extended unemployment benefits. She is seeking receptionist and clerical jobs, including at hospitals near her home in northern New Jersey. She said she has received two doses of Covid-19 vaccine and is eager to return to work to supplement her Social Security benefits.

"I go on interviews -- and I'm thankful I even get those -- but they keep telling me I'm overqualified," she said. Ms. Grosso said she worked as an office administrator, account executive and previously as a model in the fashion industry. "I sense it's an age thing -- it's just very difficult and discouraging."

Sarah Chaney Cambon contributed to this article.

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

(END) Dow Jones Newswires

February 25, 2021 13:28 ET (18:28 GMT)

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