By Sarah Chaney Cambon 

Initial unemployment claims through regular state programs dropped to 444,000 last week, marking a new low level since the pandemic hit in mid-March 2020.

The number of people receiving benefits through state and pandemic-related pandemic programs also declined at the beginning of May to 16 million people from 16.9 million in late April, the Labor Department said Thursday. That includes benefits through one of several programs, including regular state aid and federal emergency programs put in place in response to the pandemic.

U.S. stocks rose Thursday after release of the jobless claims data, putting major indexes on track to snap a three-day losing steak.

Though jobless claims are on a downward trend, April's job gain of 266,000 fell far short of the one million economists had forecast, fueling concerns among Republicans that enhanced federal unemployment payments were discouraging people from seeking work.

More than three-quarters of Republican-led states plan to end an extra $300-a-week in federal jobless benefits early, likely triggering a further decrease in the number of benefits recipients this summer.

This week Texas, Oklahoma and Indiana joined the list of at least 21 states that are cutting off access to federal benefits early after a much weaker-than-expected April jobs report sparked concerns of labor shortages. States are opting out of the $300 supplemental benefit, extended payments and benefits for gig-economy and other workers not typically eligible for unemployment benefits.

States have announced dates ranging from mid-June to mid-July for when they will stop processing pandemic-related benefits. That means nearly 3.5 million individuals could lose the $300 weekly benefits -- which were set to expire in early September -- beginning in mid-June, according to estimates by forecasting firm Oxford Economics.

Of those, about 1.4 million will also lose pandemic benefits for gig workers, and about 1.1 million will no longer have access to extended benefits that kick in after claimants exhaust their regular state benefits.

Gregory Daco, chief U.S. economist at Oxford Economics, sees unemployment benefits as one reason that employers are struggling to find workers. But, he said, other factors are also keeping unemployment recipients on the sidelines, such as parents' increased child-care responsibilities during the pandemic and the persistence of the virus.

"It's not as if just by turning off unemployment benefits people will find jobs," Mr. Daco said. "There are always going to be a number of factors that influence your decision to work."

Federal Reserve Bank of San Francisco researchers Nicolas Petrosky-Nadeau and Robert G. Valletta estimated the $300 federal benefit likely had "small but noticeable effects on job search and worker availability in early 2021," according to a new working paper.

For each month at the start of this year, if seven out of 28 unemployed workers received job offers, one of the seven would reject the offer because of the $300 supplement, the San Francisco Fed paper estimates. The researchers noted their findings were preliminary and an extension of an analysis on the impact of last year's extra $600 benefit.

Many states that are cutting off the federal unemployment supplement provide regular weekly benefits well below the national average of about $350 in March. For instance, Mississippi, which is slashing federal benefits in mid-June, makes average weekly payments of $195, according to March Labor Department data.

Oklahoma Gov. Kevin Stitt said the first 20,000 Oklahomans on unemployment benefits who return to the workforce will receive a $1,200 payment. On Monday he directed Oklahoma's unemployment agency to end all federal unemployment benefits June 26.

"This is the right move for Oklahoma," Mr. Stitt said. "Since our state has been open for business since last June, the biggest challenge facing Oklahoma businesses today is not reopening, it's finding employees."

President Biden has defended the benefits and said his administration would make clear that people can't turn down suitable jobs and keep collecting benefits, except in specific circumstances. His Democratic administration has said that other factors are deterring job searches, such as workers' fear of getting sick during the pandemic and a lack of full-time child care.

Some Democrats argue that employers aren't paying enough to lure back workers. "Let's be clear. There is not a shortage of willing workers in America," said Sen. Bernie Sanders (I., Vt.), who caucuses with Democrats. "There is a shortage of employers willing to pay workers a living wage with decent benefits."

There are signs of nascent wage pressures. Average hourly earnings rose 5.8% in April from February 2020 for private-sector and leisure-and-hospitality-employees, Labor Department figures show.

Large companies have also recently announced wage increases. Amazon.com Inc. said its open roles are offering average pay of $17 an hour, an increase over its typical starting wage of $15 an hour. McDonald's Corp. said it would increase wages for more than 36,500 hourly workers by an average of 10% over the next several months.

Labor market tightness varies greatly across the U.S. In Vermont, there were nearly five job postings for one unemployed worker last month, the highest share in the nation, according to an analysis by Job search site ZipRecruiter. Kansas, Iowa and South Dakota were among the states with at least three postings per unemployed person.

Conversely, in Hawaii, Nevada, California and New York, there were more unemployed workers than available jobs, according to the analysis. Hawaii and Nevada's tourist-driven economies had among the most job losses last year, and unemployment also rose sharply in densely populated coastal cities.

Eric Morath contributed to this article.

Write to Sarah Chaney Cambon at sarah.chaney@wsj.com

(END) Dow Jones Newswires

May 20, 2021 11:16 ET (15:16 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.