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US weekly jobless claims decline to new pandemic low, beats expectations

By Ishika Dangayach on May 27, 2021 | 03:37 AM IST

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The number of U.S. state unemployment claims dropped at the lowest last week since the coronavirus pandemic hit last spring, signaling US economic recovery has increased as governments loosen industry and trade controls.  

The Labor Department reported on Thursday that initial claims for state unemployment benefits totaled a seasonally adjusted 406,000 for the week ended May 22, compared to 444,000 the previous week. This was the lowest level since mid-March 2020. 

Economists polled by The Wall Street Journal expected 425,000 new claims last week as the labor market recovers.

While claims appear to be higher than the pre-pandemic average of around 220,000.

Despite the decrease in unemployment, the stabilization of labor markets is far from recovery as weekly claims remain substantially higher than pre-pandemic peaks.

The reduction in the number of claims demonstrates that the workforce is continuing to grow as Americans are getting vaccinated more and companies are hiring for the position which was empty due to the pandemic.

Applications are expected to fall lower in the coming weeks after Republican governors in at least 23 states declared that they would withdraw unemployment services plans that are federally sponsored, next month. These provided a weekly $300 subsidy, which employers claim encourages the unemployed to sit at home rather than pursue jobs.

Moreover, a separate report released on Thursday by the Commerce Department confirmed that economic growth accelerated in the first quarter as a result of the massive fiscal stimulus.

According to the government's second estimate for the first three months of the year, GDP increased at a 6.4 percent annualized rate last quarter. This was unchanged from the previous month's estimate and followed a 4.3 percent growth rate in the fourth quarter.

Following five straight declines in jobless claims, the 10-year Treasury note yield rose to 1.615 % while the 30-year Treasury bond yield has risen to 2.295 %.

Picture Credits: Marketwatch 

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