Economic Report: Jobless claims fall below 300,000 for first time since pandemic. Businesses shun layoffs amid labor shortage

The numbers: Just 293,000 people who recently lost their jobs applied for unemployment benefits in mid-October, pushing new U.S. jobless claims to a pandemic low amid a frantic effort by companies to hire more workers.

New jobless claims sank by 36,000 in the seven days ended Oct. 9 from a revised 329,000 in the prior week, the government said Thursday. It’s the first time new claims have dropped below the key 300,000 level since the start of the viral outbreak in March 2020.

Economists polled by The Wall Street Journal had estimated new claims would drop to a seasonally adjusted 318,000.

The number of people already collecting state jobless benefits, meanwhile, fell by 134,000 to 2.59 million. These so-called continuing claims are at a pandemic low.

Altogether, 3.65 million people were reportedly receiving jobless benefits through eight separate state or federal programs as of Sept. 25. The figures are released with a two-week delay.

Some 11.3 million people had been getting benefits before the expiration in September of an emergency federal program set up during the pandemic to make extra payments to the unemployed.

Big picture: One of the biggest headaches for businesses right now is finding enough people to hire. They are laying off very few people because of a labor shortage that is hurting production and thwarting the economic recovery.

How long the labor shortage persists is still a big unknown. The end of extra federal jobless benefits was supposed to push more people to look for work, but the size of the labor force actually shrank in September even with most companies offering higher pay.

The longer the labor shortage persists, the harder it will be for the U.S. economy to return to normal. Shortages of both labor and supplies are contributing to the biggest spike in U.S. inflation in 30 years.

Read: Inflation rises at 5.4% yearly pace in September and stays at 30-year high

Also: The Fed has bet on a future of low inflation. Here’s what could go wrong

Key details: New jobless claims fell the most last week in Florida, Tennessee and Texas.

They rose the most in California, New Mexico and Michigan, which is experiencing one of the worst delta-related coronavirus outbreaks in the country.

About 1.01 million applications for jobless benefits have been filed through the already expired federal program. Some of those claims likely reflect weeks of work missed before the federal program expired, but it’s unclear how many will be paid out.

The federal program paid extra benefits to all jobless workers, including millions of self-employed who had never been eligible for compensation in the past.

What they are saying? “The [jobless claims ] data of the last two weeks is consistent with the notion that supply remains the biggest bottleneck in the labor market, not demand,” said money market economist Thomas Simons of Jefferies LLC.

“A big drop in unemployment claims for the most recent week finally cracked the 300,000 barrier and is the strongest evidence yet that the Covid-19 delta wave has lost its influence on layoffs,” said corporate economist Robert Frick of Navy Federal Credit Union. “Hopefully, we can quickly resume dropping to the pre-Covid era average of about 200,000.”

Market reaction: The Dow Jones Industrial Average

and S&P 500

were set to open higher in Thursday trades.

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