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WASHINGTON: The number of Americans filing new claims for unemployment benefits unexpectedly rose last week, though the labour market recovery is gaining traction as economic activity picks up, driven by increased vaccinations and massive fiscal stimulus.

That was confirmed by other data on Thursday showing a measure of manufacturing activity soared to its strongest level in more than 37 years in March, with employment at factories the highest since February 2018. Layoffs announced by US companies in March were also the fewest in more than 2-1/2 years.

Initial claims have been distorted by backlogs, multiple filings and fraud, making it difficult to get a clear signal on the labour market’s health from the weekly data.

Initial claims for state unemployment benefits jumped 61,000 to a seasonally adjusted 719,000 for the week ended March 27, the Labour Department said.

Data for the prior week was revised to show 26,000 fewer applications received than previously reported, pushing total filings down to 658,000 and below their 665,000 peak during the 2007-09 Great Recession. In a healthy labour market, claims are normally in a 200,000 to 250,000 range.

The government revised the claims data from 2016, which showed applications hitting a record 6.149 million in April 2020, instead of 6.867 million in March 2020.

A staggering 79 million claims were filed under the regular state (UI) programs since mid-March 2020 when mandatory closures of non-essential businesses such as restaurants, bars and gyms were being enforced across many states to slow the first wave of COVID-19 infections.

About 28 more million applications were submitted under the government-funded Pandemic Unemployment Assistance (PAU) program, which covers the self-employed, gig workers and others who do not qualify for the UI programs.

Economists polled by Reuters had forecast 680,000 applications in the latest week. Virginia accounted for the bulk of the rise. There were also notable increases in California, Georgia, Kentucky, New Jersey and New York.

Including the PUA program, 951,458 people filed claims last week, remaining below one million for a second straight week.

The White House’s massive $1.9 trillion pandemic relief package is sending additional $1,400 checks to qualified households and extending the government safety net for the unemployed through Sept. 6.

In a separate report on Thursday, the Institute for Supply Management (ISM) said its index of national factory activity jumped to a reading of 64.7 last month from 60.8 in February. That was the highest level since December 1983.

A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the US economy. Economists had forecast the index rising to 61.3 in March. The survey’s manufacturing employment gauge shot up to its the highest reading since February 2018.

Indeed, a third report from global outplacement firm Challenger, Gray & Christmas showed planned layoffs by US-based companies dropped 11% to 30,603 in March, the fewest since July 2018. Through the first quarter planned layoffs plunged 35%, compared the October-December period. At 144,686, job cuts last quarter were the fewest since the fourth quarter of 2019.

According to a Reuters survey of economists, nonfarm payrolls likely increased by 647,000 jobs last month after rising by 379,000 in February. That would leave employment about 8.8 million below its peak in February 2020, highlighting that a full labour market recovery is years away.

At least 18.2 million people were collecting unemployment checks in mid-March, a sign that long-term joblessness was becoming entrenched.

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