First-time claims for jobless benefits—a proxy for layoffs—declined more than expected for the week ending Oct. 2 in a sign that the labor market continues to be tight and that layoffs are not a major issue in the economy.
The headline claims for newly unemployed workers posted a significant 10.4% drop on the week, falling to 326,000, after three consecutive weeks of increases, according to data from the Labor Department released on Thursday.
The number was a downside surprise as estimates pointed to a smaller decrease to 348,000, and it continued to stay below our preferred measure—the 13-week moving average—of 360,846 for the same week.
Continuing claims for federal pandemic-related unemployment benefits, which expired on Sept. 6, dropped again for the week ending Sept. 18 to 1.28 million from 2.1 million in the prior week.
As a result, overall continuing claims dropped to 4.2 million from 5 million in the prior week, and from 24.6 million for the same week last year.
New claims for the federal Pandemic Unemployment Assistance program rose to 23,453 for the week ending Oct. 2, from 17,687 previously. This is likely because of the backlog of claims that had not been processed before the benefits expired.
States with the most increases in new claims for the week ending Sept. 25 continued to be California, up by 9,907, and Michigan, up by 6,115, while states with the largest decreases were Virginia, down by 7,245 and Maryland, down by 5,617.
We expect that claims will continue to decline in the coming months as the labor market tightens.
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