WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits fell more than expected last week, in line with a gradual cooling in labor market conditions.
Initial claims for unemployment benefits fell by 22,000 to a seasonally adjusted 220,000 for the week ending Dec. 14, the Labor Department said Thursday. Economists polled by Reuters had forecast 230,000 claims for the past week.
The claims have entered a period of volatility, which could make it difficult to get a clear picture of the labor market. A range of indicators, including claims and vacancies, suggest that conditions are much smoother than before the COVID-19 pandemic, but the labor market is slowing in an orderly manner.
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Due to a rise in unemployment from 3.7% at the beginning of the year to 4.3% in July, the Federal Reserve started its policy easing cycle with an unusually large interest rate cut of half a percentage point in September.
On Wednesday, Fed Chairman Jerome Powell told reporters that “downside risks from the labor market appear to have diminished.” The US central bank cut its key overnight interest rate by 25 basis points on Wednesday to a range of 4.25%-4.50%. The country forecast only two interest rate cuts next year, fewer than the four it forecast in September, citing continued economic resilience and still high inflation.
There is also uncertainty about the policies of President 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 raised its policy rate by 5.25 percentage points between March 2022 and July 2023 to keep inflation under control.
The claims data covered the week the government surveyed companies for the nonfarm payroll component of the December employment report. Nonfarm payrolls rose by 227,000 jobs in November, boosted in part by the declining burden of hurricanes and the end of strikes by factory workers at Boeing and another small aerospace company. These factors had limited job growth to just 36,000 in October.
The resilience of the labor market, mainly reflecting historically low layoffs, has fueled economic expansion through strong consumer spending.
Data on the number of people receiving unemployment benefits next week will shed more light on the health of the labor market in December.
More and more laid-off workers are experiencing prolonged periods of unemployment, with the average duration of unemployment spells approaching a three-year high in November.
The number of people receiving benefits after an initial week of relief, a proxy for hiring, fell by 5,000 to a seasonally adjusted 1.874 million in the week ended Dec. 6, the claims report showed.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)
