The Resilience of the Labor Market: Unemployment Claims Hit Lowest Level in Over a Year
Introduction
The number of Americans applying for unemployment benefits last week fell to its lowest level in more than a year, underscoring the resilience of the labor market despite elevated interest rates that are intended to cool the economy.
Decrease in Jobless Claims
According to the Labor Department’s report on Thursday, jobless claim applications fell to 187,000 for the week ending Jan. 13, a decrease of 16,000 from the previous week. This is the fewest number of claims since September of 2022.
Lowest Four-Week Average in Almost a Year
The four-week average of claims, which provides a less volatile reading, also saw a decline. It fell by 4,750 to 203,250, marking the lowest four-week average in almost a year.
Decline in Americans Collecting Jobless Benefits
Overall, 1.81 million Americans were collecting jobless benefits during the week that ended Jan. 6, a decline of 26,000 from the previous week.
Resilience of the Labor Market
Despite high interest rates and elevated inflation, weekly unemployment claims have remained at extraordinarily low levels. They are viewed as representative of the number of U.S. layoffs in a given week.
Fed’s Efforts to Control Inflation
In an effort to stomp out the four-decade high inflation that took hold after an unusually strong economic rebound from the COVID-19 recession of 2020, the Federal Reserve raised its benchmark rate 11 times since March of 2022.
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Though inflation has eased considerably in the past year, the Labor Department reported last week that overall prices rose 0.3 percent from November and 3.4 percent from 12 months earlier, indicating that the Fed’s drive to slow inflation to its 2 percent target will likely remain challenging.
The Fed has recently decided to keep rates unchanged at its last three meetings, and most economists are predicting multiple rate cuts this year.
Surprising Resilience of the Economy
Despite initial predictions of a recession due to the rapid increase in rates by the Fed in 2022, the U.S. economy and job market have remained surprisingly resilient. The unemployment rate has stayed below 4 percent for 23 straight months, the longest streak since the 1960s.
Hopes for a Soft Landing
The combination of decelerating inflation and low unemployment has raised hopes that the Fed is successfully managing a so-called soft landing. This involves raising rates just enough to bring down prices without causing a recession.
By Matt Ott
