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New claims for unemployment benefits in the United States unexpectedly climbed above 400,000 last week from a pandemic-era low, although the labor market is expected to improve as vaccinations are increasing and lockdowns are loosening.

The pace of jobless claims filed for regular public programs increased by 37,000 in the week ending June 12 to 412,000, the US Department of Labor said Thursday. It was the first increase since April and expectations of a drop to 359,000 new claims, according to a Reuters survey of economists.

Pennsylvania and California recorded the biggest increases in unemployment benefits last week, according to preliminary figures.

The report also showed a 46,722 increase in applications for federal pandemic unemployment assistance – which provides benefits to the self-employed and workers in concert – to 118,025.

Pandemic-related federal unemployment benefits are set to expire on September 6, and more than two dozen states have said they will end some or all of the improved benefits as soon as Republican policymakers argue the benefits discourage people from look for work.

Chairman of the Federal Reserve Jay Powell Wednesday took an optimistic tone about the pace of job creation.

“There is every reason to think that we will be in a labor market with very attractive figures, with low unemployment, high participation and rising wages at all levels,” he said during of a press conference.

Labor market conditions are expected to continue to improve as the United States continues to reopen, with California, the most populous U.S. state, and New York City both lifting most of their coronavirus restrictions this week.

While the median estimate of Fed officials continued to show unemployment fell to 4.5% this year, they are now reporting GDP growth of 7%, down from 6.5% previously.

About 14.8 million Americans continue to claim unemployment benefits more than a year after the start of the pandemic.

Following the data, Treasury yields edged down as the US 10-year yield fell 0.007 percentage points to 1.563 percent. Meanwhile, stock futures cut losses, with S&P 500 futures down 0.3%.

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