By Gwynn Guilford 

Worker filings for unemployment benefits in the U.S. reached a new low since the Covid-19 pandemic began more than a year ago -- the latest sign that the labor-market rebound is gathering force.

Jobless claims, a proxy for layoffs, fell 92,000 last week to 498,000, the Labor Department said Thursday. That brings the four-week average of initial claims, which smooths out volatility in weekly data, to the lowest point since the pandemic took hold, though still well above pre-pandemic levels.

"Overall it looks like we're seeing healing in the jobs market," said Beth Ann Bovino, U.S. chief economist for S&P Global Ratings.

"That's much better than just over a year ago, but that's still double what there was pre-crisis," she said. "It would be [considered] bad in a normal recession, let's just put it that way."

While the number of new applications has been declining, the level of Americans receiving unemployment benefits remains elevated and businesses can't find enough people to hire.

With more than two-fifths of U.S. adults now fully vaccinated, Americans are spending on restaurant meals, travel and other services that they had shunned over the past year due to fear of Covid-19 and business restrictions. At the same time, government stimulus is boosting economic activity more generally.

Economists are closely watching unemployment-claims numbers for signs that companies are holding on to workers as businesses scramble to keep up with the upswing in demand.

This improvement will likely be captured in the Labor Department's April employment report, which the department will release Friday. Economists forecast that the U.S. economy added one million jobs last month, compared with a gain of 916,000 in March, and project that the jobless rate ticked down to 5.8% from 6% a month earlier.

However, the pandemic's impact was so severe that economists expect employment to close out this year 1.6% lower than in the fourth quarter of 2019, despite the swift pace of hiring they anticipate in coming months. The number of new jobless claims peaked at more than six million in the spring of 2020. After falling sharply, it then plateaued between 700,000 and 900,000 throughout the fall and winter.

Last week's decline in claims was broad-based, with new applications dropping in 41 states and the District of Columbia. Both Texas and Ohio saw unadjusted initial claims fall by around half, compared with the average level of the prior six weeks, while New York filings fell by more than two-fifths.

The decline in claims over the past few weeks is "definitely a positive sign that there are not as many layoffs happening," said Citigroup economist Veronica Clark. "It's a good sign that a return of activity levels is creating a more normal labor market."

Other signs also indicate that demand for workers is growing. A number of big employers, including Amazon.com Inc., have recently announced increases in pay.

At the end of April, job postings on Indeed, a job-search site, were 24% above where they were in February 2020, after adjusting for seasonal variation. Ads for jobs in retail, cleaning and sanitation, hospitality and tourism, and restaurants have surged in the past few weeks as businesses reopen and activity revs up.

About 16.2 million workers were receiving benefits in the week ended April 17 through one of several programs, including regular state aid and federal emergency programs put in place in response to the pandemic. After peaking at 32.4 million in June 2020, that figure, which isn't adjusted for seasonality, fell throughout the summer and early fall, flattening out at between 18 million and 20 million throughout the winter. The latest number is down 3.6 million from the first week of March, though it was still nearly eight times the number of people collecting benefits before the pandemic's onset.

A coronavirus relief package passed in March expanded eligibility for extended unemployment benefits until early September and continued a $300-a-week supplement to the amount authorized by states. While unemployment benefits typically expire after six months or less, federal extensions enacted during the pandemic will allow some people to receive payments for about 18 months.

Some economists say the extended and enhanced benefits are discouraging workers from returning to work, especially those earning lower wages. Others say the payments have provided income support to those who can't return to work because of a lack of child care, fears of contracting the virus or a lack of the skills to shift into working in fast-growing sectors such as logistics or construction.

Ms. Clark said it might not be until September, when extended unemployment benefits end and schools are set to resume in person, that many workers are drawn back into the labor force full-time.

Write to Gwynn Guilford at gwynn.guilford@wsj.com

(END) Dow Jones Newswires

May 06, 2021 12:11 ET (16:11 GMT)

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