The US Labor Department changed its methodology for the latest numbers to more accurately track seasonal fluctuations.

The number of Americans filing new claims for unemployment benefits fell more than expected last week, but remained extraordinarily high amid signs that labour market recovery was losing steam as the COVID-19 pandemic continues and government support lapses.

Initial claims for state unemployment benefits totalled a seasonally adjusted 881,000 for the week ended August 29, compared with 1.011 million in the prior week, the US Labor Department said on Thursday. Economists polled by Reuters had forecast 950,000 applications in the latest week.

With last week's claims report, the Labor Department changed the methodology it used to address seasonal fluctuations in the data, which economists complained had become less reliable because of the economic shock caused by the coronavirus crisis.

The department said last Thursday it was switching to using additive factors to more accurately track seasonal fluctuations in the series.

It said in the presence of a large shift in the claims series, the multiplicative seasonal adjustment factors, which it had been using, could result in systematic over- or under-adjustment of the data.

The labour market recovery from the depths of the pandemic in mid-March through April appears to be faltering.

Though new COVID-19 infections have subsided after a broad resurgence through the summer, many hotspots remain, especially at college campuses that have reopened for in-person learning.

Businesses have exhausted government loans to help with wages, while a weekly unemployment supplement expired in July.

A report on Wednesday from the Federal Reserve based on information collected from the US central bank's contacts on or before August 24 showed an increase in employment.

The Fed, however, noted that "some districts also reported slowing job growth and increased hiring volatility, particularly in service industries, with rising instances of furloughed workers being laid off permanently as demand remained soft".

Other labour market indicators are also flagging a cooling in job growth. Private employers hired fewer workers than expected in August. 

In addition, data from Kronos, a workforce management software company, and Homebase, a payroll scheduling and tracking company, showed employment growth stagnated last month.

The government is scheduled to publish August's employment report on Friday.

According to a Reuters survey of economists nonfarm payrolls likely rose by 1.4 million jobs last month after increasing 1.763 million in July. That would leave nonfarm payrolls about 11.5 million below their pre-pandemic level.