The number of Americans filing new claims for jobless benefits fell last week, while layoffs dropped to their lowest level in more than 24 years in August, suggesting the labor market was charging ahead even as new COVID-19 infections surge.
Initial claims for state unemployment benefits dropped 14,000 to a seasonally adjusted 340,000 for the week ended Aug. 28, the Labor Department said on Thursday. That was the lowest level since mid-March 2020 when nonessential businesses week were shut to slow the first wave of coronavirus cases.
Economists polled by Reuters had forecast 345,000 applications for the latest week.
Claims have dropped from a record 6.149 million in early April 2020. They, however, remain above the 200,000-250,000 range viewed as consistent with healthy labor market conditions.
The latest wave of COVID-19 infections, driven by the Delta variant of the coronavirus, and a relentless shortage of workers have left some economists anticipating a sharp slowdown in job growth when August's employment report is published on Friday.
Labor market indicators last month were mixed. The Institute for Supply Management's measure of factory employment contracted in August and fell to its lowest level since November.
The ADP National Employment Report showed on Wednesday that private payrolls increased by only 374,000 jobs in August. The report, however, has a very poor record predicting the private payrolls count in the Labor Department's more comprehensive and closely watched employment report.
But hiring by small businesses accelerated. The Conference Board's labor market differential - derived from data on consumers' views on whether jobs are plentiful or hard to get - slipped, but it was not too far from July's 21-year high.
While last week's claims data has no bearing on August's employment report as it falls outside the survey period, applications trended lower last month.
According to a Reuters survey of economists, nonfarm payrolls likely increased by 750,000 jobs last month after rising 943,000 in July.
"We expect the jobs report to show that the economy continued to add jobs at a rapid pace in August, defying COVID-19 Delta variant outbreaks across the country," said Julia Pollak, chief economist at ZipRecruiter.
That optimism was underscored by a separate report on Thursday from global outplacement firm Challenger, Gray & Christmas showing job cuts announced by U.S.-based employers decreased 17% to 15,723 in August, the lowest since June 1997. So far, employers have announced 247,326 jobs cuts, down 87% compared to the same period last year.
"Companies are much more concerned about their talent getting poached than with finding ways to cut staff. They are in full retention mode," said Andrew Challenger, senior vice president at Challenger, Gray & Christmas.
The pandemic has upended the labor market dynamics, creating worker shortages even as 8.7 million people are officially unemployed. The were a record 10.1 million job openings at the end of June. Lack of affordable child care, fears of contracting the coronavirus, generous unemployment benefits funded by the federal government as well as pandemic-related retirements and career changes have been blamed for the disconnect.
The labor crunch is expected to ease starting in September. The government-funded unemployment benefits lapse on Sept. 6 and schools are reopening for in-person learning.
But the soaring COVID-19 cases could cause reluctance among some people to return to the labor force.
According to the Challenger, Gray & Christmas report, hospitals, which have struggled with costs since the beginning of the pandemic as revenue-generating elective procedures get canceled, led job cuts in August. A global semiconductor shortage also caused layoffs in the automotive sector.
The report also showed companies announced plans to hire 94,004 workers in August, 80,000 of whom are seasonal for the holidays.