The number of Americans filing new claims for unemployment benefits fell more than expected last week as Covid-19 infections subsided.
Today's figures suggest that an anticipated slowdown in job growth in January was likely temporary.
Initial claims for state unemployment benefits dropped 23,000 to a seasonally adjusted 238,000 for the week ended January 29, the Labor Department said today.
Economists polled by Reuters had forecast 245,000 applications for the latest week.
Claims increased from the beginning of January through the middle of the month amid an onslaught of coronavirus infections, driven by the Omicron variant.
Business activity, especially in the services sector, was impacted by the latest wave.
The ADP National Employment report this week showed private payrolls declined in January for the first time in a year, raising a strong possibility that the overall economy shed jobs last month.
According to the Census Bureau's Household Pulse Survey published in mid-January, 8.8 million people reported not being at work because of coronavirus-related reasons between December 29 and January 10.
People who are out sick or in quarantine and do not get paid during the payrolls survey period are counted as unemployed in the Labor Department's survey of establishments even if they still have a job with their companies.
The US government is likely to report tomorrow that non-farm payrolls increased by 150,000 jobs last month after rising 199,000 in December, according to a Reuters survey of economists.
Estimates range from a decrease of 400,000 to a gain of 385,000.
The unemployment rate is forecast unchanged at 3.9%, underscoring tightening labour market conditions.
There were 10.9 million job openings at the end of December. Claims have dropped from a record high of 6.149 million in early April 2020.
The recent labour market disruptions are likely over and job growth will probably pick up. The US is reporting an average of 433,601 new Covid-19 infections a day, sharply down from the more than 700,000 in mid-January, according to a Reuters analysis of official data.
Underlying strength on the labour market was underscored by a separate report today from global outplacement firm Challenger, Gray & Christmas showing job cuts announced by US-based employers holding steady at 19,064 in January.
Layoffs were down 76% compared to January 2021, the figures revealed.