WASHINGTON: The number of Americans filing new claims for unemployment benefits dropped further below 500,000 last week, but jobless rolls swelled in early May, which could temper expectations for an acceleration in employment growth this month.

Indeed, other data on Thursday showed a measure of factory employment in the mid-Atlantic region fell in May. But businesses in the region that covers eastern Pennsylvania, southern New Jersey and Delaware increased employees’ work hours, suggesting problems finding workers. Labour and raw material shortages were likely behind the significant slowdown in the pace of growth in output at the region’s factories this month.

The supply constraints follow pent-up demand unleashed by the economy’s reopening after being severely disrupted by the Covid-19 pandemic for more than a year.

Initial claims for state unemployment benefits fell 34,000 to a seasonally adjusted 444,000 for the week ended May 15, the Labor Department said. That was the lowest since mid-March 2020 and held claims below 500,000 for two straight weeks.

Economists polled by Reuters had forecast 450,000 applications for the latest week. Claims remain well above the 200,000 to 250,000 range that is viewed as consistent with healthy labour market conditions. They have dropped from a record 6.149 million in early April 2020.

Applications are likely to decrease further in the weeks ahead after Republican governors in at least 21 states announced they would withdraw next month from unemployment programs funded by the federal government. These included a weekly $300 subsidy, which businesses say are encouraging the jobless to stay at home instead of seeking work.

From manufacturing to restaurants and bars, employers are scrambling to find workers, even as nearly 10 million Americans are officially unemployed. The enhanced unemployment benefits give more than most jobs paying minimum wages, which range from as low as $7.25 per hour to as high as $15.

In a separate report on Thursday, the Philadelphia Fed said its business activity index fell to 31.5 this month from 50.2 in April. A reading above zero indicates growth in the mid-Atlantic region’s manufacturing sector.