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Jobless Claims Fall Below 500,000 for First Time Since COVID Pandemic

Friday's nonfarm payroll report could surprise to the upside after after the first weekly jobless claims reading under 500,000 since the pandemic began in March of last year.

Weekly applications for unemployment benefits fell below 500,000 last week, Commerce Department data indicated Thursday, a post-pandemic low that suggest solid labor market strength heading into tomorrow's nonfarm payroll report.

Applications were down 92,000 for the week ending on May 1 to 498,000 -- the lowest since the pandemic began last year -- and well inside of the consensus forecast of 530,000. The four-week average slipped to 560,000, but continuing claims bumped higher, to 3.69 million for the period ending April 24.

"Jobless claims continue their rapid decline as the reopening of the economy allows more firms to hold on to people they would otherwise have had to let go," said Ian Shepherdson of Pantheon Macroeconomics. "Claims are still high by normal standards, though the underlying level probably is lower than the headline; the availability of $300 per week enhanced benefits seems to be driving large numbers of claims from people who ultimately don’t qualify for benefits."

"The payment rate for initial claims recently has been about half the pre-pandemic norm," he added. "Given the tightness of the labor market, as reported in business surveys, we expect claims to fall for the foreseeable future, with sub-300,000 a reasonable objective for the summer." 

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ADP's National Employment Report, which it compiles with Moody's Analytics, showed Wednesday that private sector jobs grew by 742,000 last month, just shy of Street forecasts of an 800,000 total but the strongest monthly figure since September. The final reading for March was revised by an extra 48,000 positions to 565,000.  

The Bureau of Labor Statistics will publish its official non-farm payroll report Friday, with economists looking for a headline total that represents around 978,000 million new jobs.

Futures contracts tied to the Dow Jones Industrial Average, which closed at a record high 30,230.34 points last night, are now indicating a modest 7 point gain to start the Thursday session, while S&P 500 futures are suggesting an opening bell dip of 3.5 points.

Contracts linked to the tech-focused Nasdaq Composite, which is running a four-day losing streak -- the longest since October -- are priced for a 22 point retreat.

Benchmark 10-year note yields, which had traded as low as 1.568% in overnight dealing, edged higher, to 1.584%, immediately following the data release.