Fewer American applied for jobless aid last week than at any time since the COVID-19 pandemic began, a sign the job market continues to recover despite the latest coronavirus surge.

Some 340,000 people filed first-time unemployment benefits in the week ended August 28, the Labor Department said Thursday. That’s 14,000 fewer than the prior week and the lowest number since March 14, 2020. Another 102,000 claims were for Pandemic Unemployment Assistance, a federal program for gig workers and freelancers who don’t qualify for traditional benefits.

The weekly count of workers applying for aid has fallen steadily since topping 900,000 in early January. Still, a resurgence of the coronavirus fueled by the highly contagious Delta variant has clouded the economic outlook. COVID-19 cases are now surpassing 135,000 a day, up from fewer than 12,000 in early July.

Delta variant hits job growth

Although the number of Americans applying for jobless benefits continues to fall, a sign layoffs are easing, the latest COVID-19 wave may be weighing on job growth. The Department of Labor is set to release its employment report on Friday, and some economists expect it show that businesses are pulling back on hiring as the Delta variant causes a nationwide surge in the virus.

“This is a new cycle low and the trend in claims is still falling, despite the surge in Covid cases across the southeastern quadrant of the country,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a research note. “But claims tell us nothing about the pace of hiring, which appears to [be] bearing the brunt of the Delta hit.” 

A report Wednesday from payroll processor ADP showed that private hiring slowed dramatically in August to below 400,000 — about two-thirds of the expected number.

About 12 million workers were receiving some form of jobless aid as of mid-August, the latest data available. Some 5.4 million were collecting Pandemic Unemployment Assistance; another 3.8 million were receiving Pandemic Unemployment Emergency Compensation, a program for those who have been jobless longer than 26 weeks. Both programs are set to end September 6. 

On that date, another 2.6 million workers will lose their $300 weekly federal supplement to regular unemployment benefits. 

“Federal policymakers were counting on the job market to have returned to normal, and the COVID-19 spread to have slowed, before benefits expired,” Andrew Stettner, a senior fellow at the Century Foundation, said in a statement. “But as a disappointing ADP report yesterday indicated, the Delta variant is poised to threaten the pace of job growth. Whether it is a slower-than-expected return to office, the cancelation of live events, or understandable public fear of travel and shopping, the pandemic continues to make the gargantuan task of rehiring millions of workers that much harder.”

The Associated Press contributed reporting.