U.S. weekly jobless claims fall below 400,000; private payrolls rise solidly

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WASHINGTON — The number of Americans filing new claims for unemployment benefits dropped below 400,000 last week for the first time since the COVID-19 pandemic started more than a year ago, pointing to strengthening labor market conditions.

That was underscored by other data on Thursday showing private payrolls increasing by the most in 11 months in May, spurred by robust demand amid a rapidly reopening economy. The data supported expectations that job growth accelerated last month, though shortages of workers and raw materials continue to loom over the labor market recovery.

“The economic reopening is continuing and should be positive for job growth,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York. “But supply and demand imbalances are creating frictions in the labor market that could be a headwind in the near term.”

Initial claims for state unemployment benefits fell 20,000 to a seasonally adjusted 385,000 for the week ended May 29. That was the lowest since mid-March 2020, when mandatory closures of nonessential businesses were enforced to slow the first wave of coronavirus infections.

Economists polled by Reuters had forecast 390,000 applications for the latest week. The fifth straight weekly decrease in claims was led by Texas and Florida.


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Claims have dropped from a record 6.149 million in early April 2020. They, however, remain well above the 200,000 to 250,000 range that is viewed as consistent with healthy labor market conditions. They could decline further as Republican governors in at least 24 states, including Florida and Texas, are cutting off unemployment programs funded by the federal government for residents starting next Saturday.

These states account for more than 40% of the workforce. The benefits being terminated early include a weekly $300 unemployment subsidy, which businesses say is discouraging the jobless from seeking work. The expanded benefits will end in early September across the country.

The COVID-19 pandemic is subsiding because of vaccinations, allowing authorities to lift restrictions on businesses and accelerating the economy’s reopening. That has led to a surge in demand that is pushing against supply constraints.

U.S. stocks opened lower. The dollar was trading higher against a basket of currencies. U.S. Treasury prices fell.


But hiring appears to have improved in May, with the ADP National Employment Report showing private payrolls increased by 978,000 jobs, the biggest increase since June last year, after rising 654,000 in April. Economists had forecast private payrolls would increase by 650,000 jobs in May.

The ADP report is jointly developed with Moody’s Analytics and was published ahead of the Labor Department’s more comprehensive, and closely watched employment report for May on Friday. However, it has a poor track record predicting the private payrolls count in the employment report because of methodology differences.


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According to a Reuters survey of economists, private payrolls likely increased by 600,000 jobs in May after rising only 218,000 in April. With government hiring expected to have increased by about 50,000, that would lead to overall payrolls advancing by 650,000 jobs in May. The economy created 266,000 jobs in April.

The forecasts were tempered by data on Tuesday showing a moderation in hiring at factories, with manufacturers complaining that worker absenteeism and short-term shutdowns because of shortages of parts and workers was limiting the sector’s potential.

Businesses across all industries and regions are reporting difficulties finding workers. The Federal Reserve’s “Beige Book” report of anecdotal information on business activity collected from contacts nationwide showed on Wednesday that “it remained difficult for many firms to hire new workers, especially low-wage hourly workers, truck drivers, and skilled tradespeople.”

Workers are scarce despite nearly 10 million Americans being officially unemployed. Generous unemployment benefits funded by the government, problems with child care and fears of contracting the virus, even with vaccines widely accessible, as well as pandemic-related retirements have been blamed for keeping workers home.

The claims report also showed the number of people continuing to receive benefits after an initial week of aid increased 169,000 to 3.771 million during the week ended May 22. These so-called continuing claims, which are reported with a one-week lag, are being closely watched for signs on how quickly hiring will pick up.

There were about 15.4 million people on unemployment benefits under all programs in the week ending May 15.

Another report on Thursday from global outplacement firm Challenger, Gray & Christmas showed job cuts announced by U.S.-based employers rose 7% last month to 24,586. Layoffs were, however, down 93.8% from May 2020. Employers have announced 192,185 job cuts in the first five months of this year, down 86% compared to the same period in 2020.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)


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