Economic Report: New applications for state unemployment benefits fall to nine-week low of 779,000, jobless claims show

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The numbers: The number of people who applied for unemployment benefits at the end of January fell to a nine-week low, suggesting that hiring is slowly picking up again as a record wave of coronavirus cases recedes.

Initial jobless claims filed traditionally through the states declined by 33,000 to a seasonally adjusted 779,000 in the seven days ended Jan. 30, the government said Thursday.

Economists surveyed by Dow Jones and The Wall Street Journal had forecast initial jobless claims to total 830,000.

Another 348,912 applications were filed through a temporary federal-relief program.

Adding up new state and federal claims, the government received 1.17 million applications last week for unemployment benefits, based on actual or unadjusted figures. Combined claims have yet to drop below 1 million a week since last May.

Before the pandemic, new claims were running in the low 200,000s and they had never risen by more than 695,000 in any one week.

Read: U.S. private payrolls rebound in January, ADP says

What happened: New applications for jobless benefits fell sharply in Illinois and also declined in Texas, Kansas, Ohio and Tennessee. They rose the most in California, New York and Florida.

The number of people already collecting state jobless benefits, meanwhile, fell by 193,000 to a seasonally adjusted 4.59 million.

An additional 3.6 million who’ve exhausted state compensation have shifted to an emergency program funded by the federal government. That marked an 289,910 decline from the prior week.

Altogether, the number of people receiving benefits from eight separate state and federal programs was reported at an unadjusted 17.8 million as of Jan. 16. The number has been falling gradually for months but is still extremely high.

Read: Service side of the U.S. economy speeds up in January

A caveat to readers: Jobless claims have correctly reflected the rise and fall in unemployment during the pandemic, but a government watchdog agency found the number of distinct individuals applying for or collecting benefits has been inflated by fraud, double counting and other problems.

Economists say to pay attention to the direction of claims instead of the totals.

Read: Jobless claims inflated, GAO finds

Also: Why the inaccurate jobless claims report is still useful to investors

The big picture: The surge in coronavirus cases during the winter triggered the first decline in U.S. employment in December since the onset of the pandemic last year. Companies involved in leisure and hospitality — restaurants, hotels, theaters, casinos — lost almost 500,000 jobs alone.

Hiring is likely to increase and layoffs decline as coronavirus vaccines become more widely distributed, governments relax business restrictions and the weather warms up. That should put the economy back on the road to recovery.

See: MarketWatch Coronavirus Recovery Tracker

What they are saying? “The improving claims picture reflects economies reopening after a drop in COVID infection rates,” said chief economist Chris Low of FHN Financial.

Market reaction: The Dow Jones Industrial Average DJIA, +0.12% and S&P 500 SPX, +0.10% were set to open slightly higher in Thursday trades.

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