U.S. states posted a much larger-than-expected drop in initial unemployment claims last week, bringing the number of those newly unemployed back toward their pre-virus pace.
The Labor Department released its jobless claims report Thursday morning. Here were the main metrics from the print, compared to consensus estimates compiled by Bloomberg:
Initial unemployment claims, week ended October 9: 293,000 vs. 320,000 expected and a revised 329,000 during prior week
Continuing claims, week ended October 2: 2.593 million vs. 2.670 million expected and a revised 2.727 million during prior week
The latest jobless claims data reflected the smallest number of new filings since March 2020. New weekly jobless claims having been inching closer to their pre-pandemic levels over the past several months, reflecting a slowdown in firings, layoffs and separations as reopenings took place and demand for workers resurged.
"I see this as evidence of a pick-up in employment growth. After all, monthly jobs growth is about the level of hiring less the level of separations," Neil Dutta, head of economics at Renaissance Macro Research, wrote in an email Thursday morning. "Assuming quits are flat this month as labor supply is released, the drop in claims implies a decline in separations and stronger payrolls."
Last week's new jobless claims helped markedly bring down the four-week moving average for initial filings, which smooths out volatility in the weekly data. This metric came in at 334,250 in the latest report, representing a decrease of 10,500 from the prior week's level. This was also the smallest total since March 2020.
Continuing claims came in at a fresh pandemic-era low in last week's report as well. These claims, which capture those still collecting benefits from regular state unemployment programs, dropped to just under 2.6 million at beginning of October. By comparison, continuing claims had averaged 1.699 million throughout 2019.
Even as the number of those newly unemployed improves, lingering concerns over the coronavirus have kept a lid on further progress in the labor market's recovery, with many individuals still remaining on the sidelines of the labor force. Demand for workers has far outpaced supply, and job openings were at a near-record high of more than 10.4 million in August, Labor Department data earlier this week showed.
"Shortages are a severe constraint for the labor market currently," Rubeela Farooqi, chief U.S. economist for High Frequency Economics, wrote in a note published Tuesday. "Overall, the labor market remains on a gradual path towards pre-pandemic health. However, the slowdown in the pace of job gains and still-depressed participation rates are reminders that the process will likely take some time."
The labor force participation rate in September was at just 61.6%, recovering from a pandemic-era low of 60.2% but still holding 1.7 percentage points below its level from February 2020.
"We’re getting more concerned that much of the drop in labor force participation will prove permanent, which is in turn a reason to expect the recovery in real activity and employment to disappoint over the coming years, while wage and price growth remain elevated," Michael Pierce, senior U.S. economist for Capital Economics, wrote in a note on Wednesday.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck