#Economic Report: U.S. jobless claims drop to three-week low of 847,000

Economists surveyed by Dow Jones and The Wall Street Journal had forecast initial jobless claims to total 875,000.

The sharp decline likely stemmed in part from the Martin Luther King. Jr. holiday. Some people who lose their jobs wait until the week after a holiday to file claims.

Another 426,856 applications were filed through a temporary federal-relief program.

Adding up new state and federal claims, the government received 1.3 million applications last week, 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.

What happened: New applications for jobless benefits fell the most last week in California, Texas, Pennsylvania and Massachusetts. They rose the most in Florida and Illinois.

The number of people already collecting state jobless benefits, meanwhile, declined by 203,000 to a seasonally adjusted 4.77 million. That’s the lowest level since the pandemic began.

Yet an additional 3.9 million who have exhausted state compensation have shifted to an emergency program funded by the federal government.

Altogether, the number of people receiving benefits from eight separate state and federal programs was reported at an unadjusted 18.3 million as of Jan. 9. The number has been falling gradually for months.

While jobless claims have correctly reflected the rise and fall in unemployment during the pandemic, a government watchdog agency also found the number of distinct individuals applying for or collecting benefits has been inflated by fraud, double counting and other problems.

Given those 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: Unemployment is no longer falling quickly owing to the winter surge in coronavirus cases. In some parts of the economy layoffs have actually risen due to more restrictions on business.

Read: Durable-goods orders and business investment climb for eighth month in a row

Hiring is likely to accelerate if the vaccine rollout accelerates and the pandemic begins to fade, but it will take time. Some companies such as manufacturers also complain they can’t find enough skilled job applicants even in the middle of a pandemic.

What they are saying? “Filings fell more than expected last week. Even so, layoffs are ongoing at an elevated pace,” said Rubeela Farooqi, chief U.S. economist. “Conditions will remain weak and recovery will be slow
until infections can be curbed and the economy can reopen more completely.”

See: MarketWatch Coronavirus Recovery Tracker

Market reaction: The Dow Jones Industrial Average
DJIA,
-2.05%
and S&P 500
SPX,
-2.57%
were set to open slightly higher in Thursday trades.