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Economic Report: Jobless claims drop to pandemic low of 348,000 in sign companies still hiring despite delta

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The numbers: New applications for U.S. unemployment benefits fell in mid-August for the fourth week in a row and slipped to a 17 month low in a sign the economy is resisting the threat from the delta variant of the coronavirus.

Initial jobless claims in the states dropped by 29,000 to 348,000 in the week ended Aug. 14, the government said Thursday.

Economists polled by The Wall Street Journal had estimated new claims would total 365,000.

Read: Want to buy a new car? Record prices and vehicle shortages abound

Big picture: Even as delta variant spreads, businesses figure the U.S. economy will weather the latest outbreak and keep growing. As a result most companies are still trying to hire and to avoid layoffs if possible because of a nationwide shortage of labor.

The big question is whether more people will return to the labor force in the fall as expected when schools reopen and extra federal unemployment benefits run out. Federal Reserve officials, for instance, worry delta could delay their return to work and prolong the labor shortage at least until the end of the year.

Read: Delta nips at the economy and threatens more inflation

Key details: New claims fell most in Texas, Michigan and Kentucky. The only states to post big increases were Virginia and New Mexico.

An additional 109,379 people filed new claims for benefits through a temporary federal program.

The number of people already collecting state jobless benefits, meanwhile, slid by 79,000 to a seasonally adjusted 2.82 million. These so-called continuing claims are also at a pandemic era low.

Altogether, some 11.7 million people were reportedly receiving benefits through eight separate state or federal programs as of July 31. That’s also a new pandemic low.

The number of people receiving compensation is expected to fall sharply in September once extra federal benefits for the unemployment benefits put in place during the pandemic expire.

Total claims averaged less than 2 million a week before the viral outbreak.

What they are saying? “A healthy drop in unemployment claims is the latest evidence the rise of the delta variant isn’t having a significant effect on the economy,” said corporate economist Robert Frick of Navy Federal Credit Union. “We can infer that hiring remains strong in August, pointing to a healthy jobs report for this month.”

Market reaction: The Dow Jones Industrial Average
DJIA,
-0.11%

and S&P 500
SPX,
+0.01%

were set to open sharply lower in Thursday trades.

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