U.S. labor market regaining footing as weekly jobless claims fall

WASHINGTON, Oct 7 (Reuters) – The number of Americans filing new claims for jobless benefits dropped by the most in three months last week, suggesting the labor market recovery was regaining momentum after a recent slowdown, as the wave of COVID-19 infections began to subside.

The weekly unemployment claims report from the Labor Department on Thursday, the most timely data on the economy’s health, also showed the number of people on state unemployment rolls plunging to an 18-month low in late September.

Improving labor market conditions bode well for the government’s closely watched employment report for September and also provide ammunition for the Federal Reserve, which signaled last month it could begin reducing is monthly bond buying as soon as November.

“The labor market is back on track after a few weeks of rising claims threw a question mark into the markets’ understanding of just how solid the economic outlook really is,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “The Fed has the evidence it needs to start paring back its emergency stimulus purchases when it meets next month.”

Initial claims for state unemployment benefits decreased 38,000 to a seasonally adjusted 326,000 for the week ended Oct. 2. That was the biggest drop since late June. Economists polled by Reuters had forecast 348,000 claims for the latest week.

Unadjusted claims, which economists say offer a better read of the labor market, tumbled 41,431 to 258,909 last week. California led the drop in claims last week. There were also decreases in Michigan, Ohio, Washington DC and Missouri. They offset notable increases in Pennsylvania and Virginia.

Claims had increased for three straight weeks as California moved people to another program following the expiration of federal government-funded aid on Sept. 6, to allow the recipients to collect one additional week of benefits.

There had also been increases in filings related to the idling of assembly plants in some states by automakers as they managed their supply of semiconductors amid a global shortage.

A resurgence in COVID-19 infections, driven by the Delta variant, also disrupted activity in the high-contact services sector. That suggested some moderation in labor market conditions in the prior weeks, which was confirmed by a separate report on Thursday from global outplacement firm Challenger, Gray & Christmas showing job cuts announced by U.S.-based employers increased 14% to 17,895 in September.

Still, layoffs were down 85% compared to September 2020.

In the third quarter, employers announced 52,560 job cuts, the fewest since the second quarter of 1997 and down 23% from the July-September period.

Stocks on Wall Street were trading higher. The dollar dipped…