New jobless claims beat forecasts and drop to pandemic-low of 406,000

The number of new applications for unemployment benefits dropped 38,000 last week to 407,000, the Labor Department reported on Thursday, the new pandemic low.

The figure represents the number of people who filed for unemployment in the previous week and was below forecasters’ expectations of 425,000 new claims. The number is also lower than the week prior. 

“Many of the factors that sidelined workers earlier in the recovery are changing to contribute to fast job gains in the rest of 2021. The pandemic is coming under control in the U.S., assuaging health fears,” said PNC senior economist Bill Adams. 

The weekly jobless claims are being closely scrutinized as some economists assert that there is a labor shortage in the U.S. April’s jobs report was a major disappointment, with the economy adding just 266,000 jobs, a figure that fell far short of forecasters’ predictions of nearly 1 million new jobs. The unemployment rate also increased slightly, to 6.1%.

Economists are blaming the glut of open positions on a variety of reasons, including the generous amount of unemployment insurance being handed out by the federal government due to COVID-19. 

The federal government’s supplemental pandemic unemployment program provides $300 per week in federal payments on top of state unemployment funds. The national average of statewide unemployment insurance before COVID-19 hit was $387 per week, meaning that unemployed people in America are now making, on average, the equivalent of a $17.17 hourly wage.

Nearly half the states in the country have announced plans to opt out of the expanded benefits program in the coming weeks in an effort to reinvigorate their workforces. It is unclear how much of an impact these announcements have had on jobless claims reports such as the one released on Thursday. 

Some economists are warning that the supplemental payments could also be contributing to growing inflationary concerns. Former Treasury Secretary Larry Summers, who was also the director of the National Economic Council under President Barack Obama, has been warning for months that overheating and inflation are major concerns for the country going forward. He recently said in an op-ed that there is indeed a labor shortage and that some states should end the benefits early.