The number of Americans filing new applications for jobless benefits unexpectedly fell last week, consistent with a low level of layoffs, but the unemployment rate likely remained high in December amid sluggish hiring.
Initial claims for state unemployment benefits dropped for a second straight week, declining by 10,000 to a seasonally adjusted 214,000 for the week ended December 20, the Labor Department said on Wednesday.
Economists polled by Reuters had forecast 224,000 claims for the latest week. The Labor Department published the report a day early because of the Christmas Day holiday. Part of the surprise decline in applications could reflect challenges adjusting the data for seasonal fluctuations around the year-end holiday season.
“Unless companies actually fire workers, the economy will continue to move forward at a moderate pace,” said Christopher Rupkey, chief economist at FWDBONDS.
The labor market remains locked in what economists and policymakers describe as a “no hire, no fire” mode.
Though the economy remains resilient, with gross domestic product increasing at its fastest pace in two years in the third quarter, the labor market has almost stalled. Economists say President Donald Trump’s import tariffs and immigration crackdown have impacted labor demand and supply.
The data had little effect on U.S. financial markets during a holiday-shortened session.
The number of people receiving unemployment benefits after an initial week of aid, a proxy for hiring, increased 38,000 to a seasonally adjusted 1.923 million during the week ended December 13, the claims report showed.
The so-called continued claims covered the period during which the government surveyed households to calculate December’s unemployment rate. Continued claims fell marginally between the November and December survey weeks.
The elevated continued claims aligned with a survey from the Conference Board on Tuesday showing consumers’ perceptions of the labor market deteriorated this month to levels last seen in early 2021. The unemployment rate increased to a four-year high of 4.6% in November, though part of the rise was because of technical factors related to the 43-day government shutdown.
The record-long shutdown prevented data collection for October’s unemployment rate. The Federal Reserve this month cut its benchmark overnight interest rate by another 25 basis points to the 3.50% to 3.75% range, but signaled borrowing costs were unlikely to fall in the near term as policymakers await clarity on the direction of the labor market and inflation.
“Continued claims remain at a level consistent with a slow pace of hiring but aren’t sending a signal that hiring conditions have gotten worse,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics.
(Reporting by Lucia Mutikani;Editing by Dan Burns and Lisa Shumaker)
