WASHINGTON (Reuters) – The number of Americans filing new applications for jobless benefits fell more than expected last week, consistent with a gradual cooling in labor market conditions.
Initial claims for state unemployment benefits dropped 22,000 to a seasonally adjusted 220,000 for the week ended Dec. 14, the Labor Department said on Thursday. Economists polled by Reuters had forecast 230,000 claims for the latest week.
Claims have entered a period of volatility, which could make it challenging to get a clear view of the labor market. A range of indicators including claims and job openings suggest that conditions are much looser than they were before the COVID-19 pandemic, but the labor market is slowing in an orderly fashion.
A jump in the unemployment rate to 4.3% in July from 3.7% at the start of the year saw the Federal Reserve kicking off its policy easing cycle with an unusually large half-percentage-point interest rate cut in September.
On Wednesday, Fed Chair Jerome Powell told reporters that the “downside risks of the labor market do appear to have diminished.” The U.S. central bank on Wednesday cut its benchmark overnight interest rate by 25 basis points to the 4.25%-4.50% range. It projected only two rate cuts next year, down from the four it had forecast in September, citing continued economic resilience and still-elevated inflation.
There is also uncertainty over policies from President-elect Donald Trump’s incoming administration, including tariffs on imported goods, tax cuts and mass deportations of undocumented immigrants, which economists have warned would be inflationary.
The Fed hiked its policy rate by 5.25 percentage points between March 2022 and July 2023 to tame inflation.
The claims data covered the week during which the government surveyed businesses for the nonfarm payrolls component of December’s employment report. Nonfarm payrolls increased by 227,000 jobs in November, in part boosted by the fading drag from hurricanes and the end of strikes by factory workers at Boeing (NYSE:BA) and another small aerospace company. These factors had restricted job growth to only 36,000 in October.
The labor market resilience, mostly reflecting historic low layoffs, has been driving the economic expansion through strong consumer spending.
Data next week on the number of people on unemployment rolls will shed more light on the labor market’s health in December.
More laid off workers are experiencing long bouts of unemployment, with the median duration of jobless spells approaching a three-year high in November.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, slipped 5,000 to a seasonally adjusted 1.874 million during the week ending Dec. 6, the claims report showed.
