US Jobless Claims Fall as Labor Market Remains Resilient

The labor market in the United States continues to show resilience despite elevated interest rates, as the number of Americans applying for unemployment benefits fell last week, according to the Labor Department.

Decrease in Jobless Claims

For the week ending December 30, jobless claims dropped by 18,000 to 202,000, compared to the previous week. The four-week average of claims also decreased by 4,750 to 207,750, smoothing out some of the week-to-week volatility.

Fewest Americans Collecting Jobless Benefits in Two Months

A total of 1.86 million Americans were collecting jobless benefits during the week that ended on December 23, marking a decrease of 31,000 from the previous week and the lowest number in two months.

Low Levels of Unemployment Claims

Weekly unemployment claims serve as a proxy for layoffs, and they have remained at exceptionally low levels despite high interest rates.

Fed’s Efforts to Control Inflation

The Federal Reserve has raised its benchmark rate 11 times since March 2022 in an attempt to combat the four-decade high inflation caused by the strong economic rebound from the COVID-19 recession in 2020.

Inflation Eases but Remains Above Target

Although inflation has eased over the past year, it still slightly exceeds the Fed’s target of 2 percent. In its recent meetings, the Fed has kept rates unchanged and is now indicating a possibility of three rate cuts next year.

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Resilient Job Market

Contrary to predictions, the U.S. economy did not slide into a recession when the Fed started raising rates. The unemployment rate has remained below 4 percent for 22 consecutive months, the longest streak since the 1960s.

Healthy Levels of Job Openings

Although the number of job openings has decreased slightly, it is still at historically healthy levels. In November, American employers posted 8.8 million job openings, the lowest since March 2021. However, there is still strong demand for workers compared to historical standards.

Hope for a Soft Landing

The combination of decelerating inflation and low unemployment has raised hopes that the Federal Reserve is successfully managing a “soft landing” by raising rates enough to control prices without causing a recession.

By Matt Ott