The number of Americans filing new claims for jobless benefits fell to the lowest level in nearly 18 months last week, offering more evidence that job growth was being hindered by labor shortages rather than cooling demand for workers.

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 levels last seen in mid-March 2020 when the economy was reeling from mandatory shutdowns of nonessential businesses to slow the first wave of COVID-19 cases.

The continued downward trend in layoffs followed on the heels of a report on Wednesday showing job openings raced to a new record high in July, indicating a tightening labor market, which some economists argued could put pressure on the Federal Reserve to announce when it would start scaling back its massive monthly bond-buying program. Fed Chair Jerome Powell has offered no signal on when the U.S. central bank plans to cut its asset purchases beyond saying it could be "this year."

"There is likely to be a fierce debate at the coming Fed meeting on how tight the labor market is, but if policymakers focus on the most timely data we've got, they will realize that the labor market is close to meeting their more stringent criteria for an interest rate hike let alone the trigger for tapering," said Chris Rupkey, chief economist at FWDBONDS in New York.

Initial claims for state unemployment benefits dropped 35,000 to a seasonally adjusted 310,000 for the week ended Sept. 4, the lowest level since mid-March 2020. Economists polled by Reuters had forecast 335,000 applications for the latest week.

Unadjusted claims, which economists say offer a better read of the labor market, fell 8,005 to 284,287 last week.

The second straight weekly decline in claims came even as filings surged in Louisiana after Hurricane Ida devastated U.S. offshore energy production and knocked off the power. There were also notable increases in California, Virginia, and Michigan. But those rises were offset by big decreases in claims in Florida, Georgia, New York, Missouri, and Tennessee.

Claims have dropped from a record 6.149 million in early April 2020. They are closing in on the upper end of the 200,000-250,000 range viewed as consistent with healthy labor market conditions.

Stocks on Wall Street were trading higher. The dollar dipped against a basket of currencies. U.S. Treasury prices rose.

Jobless claims
Jobless claims

DOWNWARD TREND

The continued downward trend in claims suggested the labor market was holding up, despite a resurgence in infections, driven by the Delta variant of the coronavirus. Rising cases contributed to holding back job growth in August, with nonfarm payrolls increasing only 235,000, the smallest gain since January. Payrolls surged 1.053 million in July. 

"There has been no pickup in job separations even as the economy endures another wave of new virus infections," said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

Job openings surged to a record 10.9 million at the end of July. Labor market tightness was underscored by the Fed's Beige Book report on Wednesday, based on information collected on or before Aug. 30, which showed "all Districts noted extensive labor shortages that were constraining employment and, in many cases, impeding business activity."

About 8.4 million people are officially unemployed. This labor market imbalance has been blamed on lack of affordable childcare, fears of contracting the coronavirus, generous unemployment benefits funded by the federal government as well as pandemic-related retirements and career changes.

There is cautious optimism that the labor crunch will ease starting in September following the expiration of the government-funded unemployment benefits on Monday, including a $300 weekly subsidy, blamed by businesses and Republicans for discouraging the jobless from seeking work.

The new school year is underway, with most school districts offering in-person learning.

But the Delta variant could cause reluctance among some people to return to the labor force. There is also no guarantee that the expiration of the expanded benefits will force the unemployed to look for work. An early termination of these benefits by about 25 states led by Republican governors over the summer did not expand the labor pool.

The claims report also showed the number of people continuing to receive benefits after an initial week of aid tumbled 22,000 to 2.783 million in the week ended Aug. 28, the lowest level since mid-March 2020.

At least 11.930 million people were receiving benefits under all programs during the week ended Aug. 21. According to Andrew Stettner, a senior fellow at The Century Foundation, more than 8 million people lost all their pandemic benefits on Monday and another 2.1 million saw their benefits drop by $1,200 per month.

This so-called unemployment insurance cliff could contribute to curbing economic growth this quarter, though consumer spending is likely to remain underpinned by the strengthening labor market and the accompanying strong wage gains.

Households also accumulated more than $2 trillion in savings during the pandemic and have seen their wealth boosted by the record-high stock market and house prices.

"That's going to weigh on growth, but the consumer spending will still increase, just at a somewhat weaker pace," said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania.

Economists have slashed their growth estimates for the third quarter after dismal automobile sales in August, soaring COVID-19 cases, and fading fiscal stimulus.

Amazon is offering to cover four-year college tuition for most of its approximately 750,000 hourly workers in the United States, the latest major employer to offer the perk to attract and retain hourly employees in a tight job market.

Starting in January, Amazon for the first time will pay for tuition, fees, and books for warehouse, transportation, and other hourly employees who want to pursue bachelor's degrees. It will also begin covering high school diploma programs, GED's and English as a Second Language (ESL) certifications for employees.
Amazon (AMZN) has not finalized a list of colleges workers will be eligible to attend using the benefit.
Amazon employees who have been with the company for at least 90 days are able to use the benefit, and employees must continue working part-time or full-time at Amazon while taking classes. Workers at Whole Foods, which Amazon owns, are not eligible.
    Amazon has not offered to cover bachelor's degree programs for its workers in the past but has an existing benefit for employees that covers tuition costs for two-year associate degrees and certifications at partner schools such as the University of Maryland's online program and Miami Dade College.
    Its move to add four-year degrees to its package comes as rival employers such as Walmart (WMT) and Target (TGT) beef up their college benefit programs for workers.
    Walmart said in July that it was dropping a previous $1 a day tuition fee paid by its workers who want to earn a degree at 10 academic partners and also begin covering the costs of their books. Walmart has around 1.5 million workers.
    Target in August said it will pay full tuition and books for its more than 340,000 workers at around 40 partner schools. Target also said it will pay up to $10,000 a year for master's programs within its network of partners.
    Amazon's move also comes as retailers and warehouses around the country face challenges hiring employees to staff stores and warehouses. In July, there were 879,000 unfilled jobs in the retail industry and 222,000 in the transportation and warehouse industry, according to the latest data from the Bureau of Labor Statistics.
    Amazon said in May that it was hiring 75,000 workers across its logistics network and bumping starting pay from its $15 minimum rate to an average of $17 an hour. The company is also offering sign-on bonuses of up to $1,000 to attract workers.
    "We're spending a lot of money on signing and incentives," said Brian Olsavsky, Amazon's chief financial officer, in July. "It's a very competitive labor market out there. And certainly, the biggest contributor to inflationary pressures that we're seeing in the business."
      Amazon also announced Thursday that it plans to retrain 300,000 employees for higher-skilled, fast-growing jobs within the company over the next four years, upping a prior pledge it made in 2019 to train 100,000 workers for new positions.
      Amazon offers internal retraining programs for roles such as software and IT engineers, data center technicians, and researchers and designers.