The number of new applications for unemployment benefits dropped significantly last week to 730,000, the Labor Department reported Thursday, as the House nears a vote on a $1.9 trillion coronavirus relief package.
The number of new jobless claims was well below forecasters’ expectations of 838,000.
Economists expressed caution, however, that the stronger than expected report was not all good news, attributing some of the drop to weather distortions, notably the winter storm that crippled Texas’s power grid. Texas experienced one of the sharpest declines in weekly unemployment claims of any state last week.
“Weather related distortions in the jobless claims to cause a greater than expected decline in the topline forecast,” RSM chief economist Joseph Brusuelas tweeted Thursday. “Texas & other states impacted by the deep freeze to see a drop in claims. Take no comfort in any decline.”
The Labor Department’s weekly unemployment insurance claims report represents the number of people who filed for unemployment in the previous week. The report presents a high-frequency snapshot of the strength of the job market.
Thursday’s report follows two consecutive weeks of increases in jobless claims, with figures still well above even the worst days of the 2008 financial crisis. Economists are hopeful for a period of rapid economic expansion as coronavirus cases plummet across the country and more people get vaccinated, but the Congressional Budget Office warned earlier this year that it could take years before the labor force returns to pre-pandemic levels.
Federal Reserve Chairman Jerome Powell stressed the dangers of the current unemployment situation during his congressional testimony this week, noting that when those who have dropped out of the labor market entirely are taken into account, unemployment remains as high as 10%.
“As with overall economic activity, the pace of improvement in the labor market has slowed,” Powell said in his opening testimony. “The unemployment rate remained elevated at 6.3% in January, and participation in the labor market is notably below pre-pandemic levels. Although there has been much progress in the labor market since the spring, millions of Americans remain out of work.”
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To address some of those concerns, the House Budget Committee on Tuesday approved a nearly $2 trillion Democratic budget reconciliation bill, teeing up a vote on the House floor later this week.
The bill includes many of the key measures President Biden campaigned on — a $400 boost in unemployment benefits, an expanded Paycheck Protection Program, funds to ramp up the distribution and administration of vaccines, a $15 an hour minimum wage, and $1,400 checks to individuals.
