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The number of Americans filing new applications for unemployment benefits fell to a more than three-year low last week, allaying fears of a sharp deterioration in labor market conditions after independent surveys showed job losses in November.
Difficulties adjusting the weekly jobless claims data around the Thanksgiving holiday could have accounted for some of the unexpected decline reported by the Labor Department on Thursday. Still, economists said the weekly unemployment claims report, the most timely data on the economy’s health, was consistent with a labor market that remained in a holding pattern.
Revelio Labs, which develops monthly employment estimates from online employment profiles and other information, said the economy lost 9,000 jobs in November. That was on the heels of the ADP employment report on Wednesday showing private payrolls decreased last month by the most in more than 2-1/2 years.
“Those job losses from other alternative measures of labor statistics may be overstating the weakness in the nation’s employment markets,” said Christopher Rupkey, chief economist at FWDBONDS. “The tea leaf readers at the Federal Reserve may need to recheck their figures because it certainly does not look like economic growth is in danger of stalling out.”
Initial claims for state unemployment benefits fell 27,000 to a seasonally adjusted 191,000 for the week ended November 29, the lowest level since September 2022. Economists polled by Reuters had forecast 220,000 claims for the latest week.
Claims tend to be volatile around holidays, like last Thursday’s Thanksgiving Day, a trend that could persist as the year winds down. Economists at Goldman Sachs noted that the seasonal factor, the model used by the government to strip out seasonal fluctuations from the data, expected a much smaller decline in non-seasonally adjusted claims than in previous years with similar calendar configurations.
Unadjusted claims plunged 49,419 to 197,221 last week. The decline was more than double the 21,172 drop that had been anticipated by the seasonal factor. Filings tumbled 19,551 in California and decreased 8,349 in Texas. There were sizeable drops in applications in New York, Washington state and Florida.
The sharp drop in applications did not change the narrative of a stagnant labor market. Job cuts are prevalent in some industries and in small and medium-sized companies, and hiring is tepid at best. A separate report from global outplacement firm Challenger, Gray & Christmas showed planned job cuts by U.S.-based employers declined 53% to 71,321 in November.Â
But employers have announced about 1.171 million job cuts so far this year, up 54% versus the first 11 months of 2024. Most of the layoffs have been in the technology sector as companies integrate artificial intelligence in some roles.
The Bureau of Labor Statistics’ closely watched employment report for November, originally due on Friday, has been delayed because of a record 43-day shutdown of the government and will now be published on December 16.
Labor Market Signals are Mixed
In the absence of this report, some economists said Federal Reserve officials meeting next week could lean more on the ADP and Revelio Labs reports. But others cautioned against putting too much emphasis on private surveys, arguing the sample size was limited and the methodology was often unknown.Â
“We should view these reports, not as a representation of the macro economy, but a segment of the economy,” said Sung Won Sohn, a finance and economics professor at Loyola Marymount University. “For example, ADP, they don’t process payrolls for everybody; it is not a random sample.”
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As many as five of the 12 voting policymakers on the central bank’s rate-setting Federal Open Market Committee have voiced opposition to or skepticism about cutting rates further, while a core of three members of the Washington-based Board of Governors wants rates to fall.
Stocks on Wall Street fluctuated between small gains and losses. The dollar was steady against a basket of currencies. U.S. Treasury yields rose.
Economists view the labor market as remaining in a “no fire, no hire” state. Labor market stasis has been blamed on reduced labor supply amid a reduction in immigration that started during the final year of former President Joe Biden’s term and accelerated under President Donald Trump’s administration.
The integration of artificial intelligence into some job roles is also eroding demand for labor, with entry-level positions taking most of the hit.Â
Economists also say Trump’s trade policy has created an uncertain economic environment that has hamstrung the ability of businesses, especially small enterprises, to hire.
The number of people receiving unemployment benefits after an initial week of aid, a proxy for hiring, slipped 4,000 to a seasonally adjusted 1.939 million during the week ended November 22, the claims report showed.Â
The elevated so-called continuing claims suggest a steady rise in the unemployment rate in the months ahead. The Chicago Fed on Thursday estimated the jobless rate was around 4.4% in November. The government will not be publishing October’s unemployment rate as the shutdown prevented data collection.
The unemployment rate increased to 4.4% in September from 4.3% in August. The weak hiring was evident in the Challenger report, which showed planned hiring by U.S.-based companies totaled only 497,151 in the first 11 months of this year, the lowest year-to-date total since 2010, and down 35% compared to the same period in 2024.Â
“For the people that are laid off, it’s really hard for them to find new employment,” said Brian Bethune, an economics professor at Boston College. “You’ve got a really bifurcated market there.”Â
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)
