By Noreen Burke
Investing.com -- The number of Americans applying for initial unemployment benefits fell to 963,000 last week, the lowest weekly total since late March, when lockdowns were put in place around the country to slow the spread of Covid-19.
The numbers add to evidence of an ongoing recovery in the labor market, despite fears that the improvement had stalled due to the surge in coronavirus cases across the south and west of the U.S. in June and July.
Economists had forecast a more modest decline to 1.120 million.
The number of continuing claims, which are reported with a one-week lag to initial claims, decreased to 15.486 million. The previous week's figure was also revised downwards to 16.090 million.
In addition, the Labor Department said another 489,000 people applied for Pandemic Unemployment Assistance, down from 656,000 the previous week. The sharp drop may reflect in part the reduced incentive to apply for the benefits, funding for which under the CARES Act expired at the end of July.
Investors are worried that that last month’s expiration of the extra $600 in enhanced weekly unemployment benefits will hit consumer spending and act a drag on the recovery. President Trump has signed an executive order extending payouts at half that level.
The sharper-than-expected drop in claims takes a little of the pressure off Congress and the White House officials to agree the size and scope of the next coronavirus fiscal relief bill. House Democrats have passed a bill with a sticker price of $3.5 trillion while the Republican-led Senate and the Administration are proposing measures that amount to a more conservative $1 trillion.
San Francisco Federal Reserve Bank President Mary Daly said on Wednesday the economic recovery will be slow and gradual depending on how the virus progresses, and added that she is not expecting a V-shaped recovery.
Any policies that can encourage consumers to keep spending during the downturn will help the recovery, Daly said.