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The number of Americans filing new applications for unemployment benefits fell last week from an upwardly revised level in the prior week, suggesting layoffs remained low, but tepid hiring is stoking households’ anxiety about the labor market.
While difficulties adjusting the weekly unemployment claims data for seasonal fluctuations around the year-end holiday season and turn of the year have injected volatility into the numbers, economists said there has been no material change in labor market conditions.
Federal Reserve Chair Jerome Powell told reporters on Wednesday that “labor market indicators suggest that conditions may be stabilizing after a period of gradual softening.” The U.S. central bank left its benchmark overnight interest rate in the 3.50%-3.75% range.Â
“There is no evidence that layoffs are picking up. There are firms that are trying to reduce their headcount, but this is being done almost exclusively through attrition rather than outright job cuts,” said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets. “Layoffs on an underlying basis are roughly steady.”
Initial claims for state unemployment benefits dropped 1,000 to a seasonally adjusted 209,000 for the week ended January 24, the Labor Department said on Thursday. The prior week’s level of claims was revised up by 10,000 to 210,000.Â
Economists polled by Reuters had forecast 205,000 claims for the latest week. The claims data included last Monday’s Martin Luther King Jr. holiday. Claims tend to be volatile around public holidays. More volatility is likely in the weeks ahead after a winter storm brought snow and freezing temperatures to a large part of the country over the weekend.
Economists say companies are reluctant to lay off workers while assessing what they have called an ever-shifting economic landscape, mostly related to tariffs on imports.Â
United Parcel Service and Amazon.com announced job cuts this week, but those layoffs will probably not have a significant impact on claims. High-profile layoffs last year, including from those two companies, did not result in a notable surge in jobless claims.
U.S. stocks were trading lower. The dollar fell against a basket of currencies. Longer-dated U.S. Treasury yields rose.
Consumers Pessimistic About The Labor Market
The number of people receiving unemployment benefits after an initial week of aid, a proxy for hiring, decreased 38,000 to a seasonally adjusted 1.827 million during the week ended January 17, the claims report showed.Â
The so-called continuing claims figures also have been impacted by the seasonal adjustment challenges. Some people probably have exhausted their eligibility for benefits, limited to 26 weeks in most states, which could be pushing continuing claims down. Economists argued continuing claims were also consistent with the low level of layoffs.
Continuing claims covered the period during which the government surveyed households for January’s unemployment rate.
The jobless rate slipped to 4.4% in December from 4.5% in November. The unemployment rate likely remained elevated this month. The Conference Board’s employment measures deteriorated in January. Economists attributed tepid hiring to tariffs and immigration raids that have reduced demand and supply of labor as well as businesses being uncertain of their staffing needs as they invest heavily in artificial intelligence.
The Chicago Fed is forecasting the unemployment rate for January will be 4.35%, which would round up to 4.4%.
The Bureau of Labor Statistics’ closely watched employment report for January, scheduled for release next Friday, could be delayed if the government shuts down again over the weekend due to an impasse over funding for the U.S. Department of Homeland Security. Democrats in the U.S. Senate have demanded new restrictions on DHS enforcement efforts following a second fatal shooting by federal agents in Minneapolis recently.
Congress faces a January 30 deadline to fund the government or risk a partial government shutdown.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)
