US workers file 406,000 new jobless claims as economy heats up

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The number of Americans seeking new unemployment benefits continued to drop last week to a new low during the pandemic, the feds said Thursday.

Initial worker filings for jobless claims, seen as a signal of layoffs, reached 406,000 last week, down from a 444,000 reported the prior week, according to data released Thursday by the Labor Department.

Economists surveyed by Dow Jones expected 425,000 new jobless claims. 

Despite falling new jobless claims, almost 16 million Americans were still on some form of government assistance through all unemployment programs as of early May.

Still, the downward trend of new claims is an indication of a labor market that appears to be healing, albeit slower than expected.

Companies have reported struggling to recruit new workers in recent weeks, with many citing pandemic-boosted federal unemployment benefits as a cause. Other reasons for the labor crunch include fear of getting COVID-19 and school closures keeping parents at home, economists say.

Some economists have warned that the labor shortage could hold back the US economic recovery.

At least 23 states with Republican governors are now looking to lure workers back into the labor market by withdrawing from the federal program that provides an extra $300 in additional unemployment benefits every week.

Mark Hoplamazian, CEO of Hyatt Hotels, told CNBC earlier this week that the company is seeing demand rise again, but is struggling to hire enough new workers to keep up. However, he added, the company is seeing hiring rise in states that have announced plans to end the extra benefits.

“We have seen increases in the number of applicants for jobs in states where the governors and the state legislatures have actually suspended the additional unemployment benefits that the federal government had mandated,” he said. 

Other companies have announced wage increases and other perks to lure new workers. One McDonald’s in Illinois is even offering new workers a free iPhone if they work there for at least six months.

Some companies, politicians and economists have said the extra benefits add up to more than what businesses can afford to pay people, particularly for entry level jobs.

The White House, in turn, has defended the extra benefits, saying that businesses should pay people more. President Biden has added that, “If you’re receiving unemployment benefits and you’re offered a suitable job, you can’t refuse that job and just keep getting the unemployment benefits.”

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