U.S. jobless claims fall after hitting two-month high. Delta hasn’t hurt much – yet

The numbers: Applications for U.S. unemployment benefits fell in late July after hitting a two-month high in the prior week, suggesting the delta strain of the coronavirus hasn’t harmed the economy much so far.

Initial jobless claims declined by 24,000 to 400,000 in the week ended July 24, the government said Thursday. Economists polled by The Wall Street Journal had forecast 380,000 new claims.

Requests for benefits had surged by 56,000 in mid-July, but the increase largely appears to have stemmed from seasonal swings in employment in the auto industry. Automakers often shut downs plants briefly in July to retool to build new models.

Auto workers in some states such as Michigan are eligible for benefits during these shutdowns.

Economists are watching to see if rising coronavirus cases tied to the contagious delta strain causes companies to lay off workers again or discourages people from looking for work, especially at restaurants and other businesses that cater to the public.

Big picture: Job openings are at a record high and Americans say it’s easy to find work, surveys of businesses and households show. Finding good help is so hard that many companies are increasing pay and trying to avoid layoffs.

The labor market still has a long way to get back to pre-Covid employment levels, however. Millions of people are still out of work and evidence suggests some are turning down jobs because of general unemployment benefits put in place during the pandemic.

Key details: New claims fell sharply in Pennsylvania, Texas and Kentucky. The only state to post a large increase was California.

The number of people already collecting state jobless benefits, meanwhile, rose by 7,000 to a seasonally adjusted 3.27 million. These so-called continuing claims are still hovering near a pandemic low, however.

Some 4.2 million people who have exhausted state compensation were also getting temporary federal benefits as of July 10, the latest data available.

The number has tumbled from almost 6 million in the middle of June, likely reflecting the cutoff of federal benefits. Some 26 states have ended extra federal benefits before the September expiration to prod people to go back to work.

Read: The cost of living posts biggest increase since 2008 as inflation spreads

Altogether, some 13.2 million people were reportedly receiving benefits through eight separate state or federal programs as of July 10.

Note to readers: A government review found the number of distinct individuals collecting benefits has been inflated by fraud and double counting.

What they are saying? “The underlying trend probably is still downwards, though the spread of the delta Covid variant clearly raises the risk of renewed layoffs in the leisure and hospitality sectors in the hardest-hit states,” said chief economist Ian Shepherdson of Pantheon Macroeconomics.

Market reaction: The Dow Jones Industrial Average
and S&P 500
were rose in Thursday trades. The government reported that U.S. GDP climbed at a 6.5% rate in the second quarter.

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