US weekly jobless claims decline; layoffs tumble

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 labour market was charging ahead even as new Covid-19 infections surge.The weekly unemployment claims report from the Labor Department on Thursday, the most timely data on the economy’s health, also showed the number of people on state unemployment rolls tumbling to a 17-month low in the third week of August.Declining layoffs should help to ease concerns about the economy even if August’s closely watched employment report on Friday shows a slowdown non-farm payrolls growth.“Regardless of tomorrow’s report, keep in mind that the weekly jobless figures say the labour market screws continue to tighten,” said Chris Rupkey, chief economist at FWDBONDS in New York. “There is no sign that the Delta variant is leading to job losses across the country.”Initial claims for state unemployment benefits dropped 14,000 to a seasonally adjusted 340,000 for the week ended August 28, the lowest level since mid-March 2020 when mandatory closures of nonessential businesses were enforced 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 6.149mn in early April 2020.They, however, remain above the 200,000-250,000 range viewed as consistent with healthy labour 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 August job growth.Labour 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 release of the ADP National Employment Report on Wednesday showed 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 employment report.But hiring by small businesses accelerated. The Conference Board’s labour 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.The claims report showed the number of people continuing to receive benefits after an initial week of aid plunged 160,000 to 2.748mn in the week ended August 21, the lowest level since mid-March 2020. US stocks opened higher.The dollar was steady against a basket of currencies. US Treasury prices rose.According to a Reuters survey of economists, non-farm payrolls likely increased by 750,000 jobs last month after rising by 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 US-based employers decreased 17% to 15,723 in August, the lowest number since June 1997.So far this year, employers have announced 247,326 job 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.The labour market recovery is gaining steam despite a slowdown in economic activity caused by the latest coronavirus wave, the fading boost from fiscal stimulus and supply constraints.But the moderation in growth is likely to be mitigated by a shrinking trade deficit.The trade gap narrowed 4.3% to $70.1bn in July, the Commerce Department said in a separate report on Thursday.Economists have sharply marked down their gross domestic product estimates for the third quarter to a low as a 2.9% annualised rate from as high as a 9% pace.The economy grew at a 6.6% rate in the second quarter.“The slowdown is not broad-based and primarily reflects payback from stimulus spending and ongoing supply issues,” said Ellen Zentner, chief US economist at Morgan Stanley in New York. They are in full retention mode,” said Andrew Challenger, senior vice president at Challenger, Gray & Christmas.The pandemic has upended labour market dynamics, creating worker shortages even as 8.7mn people are officially unemployed.There were a record 10.1mn job openings at the end of June. Lack of affordable childcare, 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 labour crunch is expected to ease starting in September.