Author: Lucia Mutikani
WASHINGTON (Reuters) – The number of Americans who filed new claims for jobless benefits fell to an 11-month low last week, pointing to a steady labor market, although a slowdown in hiring led to some laid-off workers experiencing long periods of unemployment .
Signs of a steady cooling in the labor market could allow the Federal Reserve to keep interest rates unchanged in January against a backdrop of still high inflation. The U.S. central bank last month projected a shallower pace of rate cuts this year than forecast in September, when it kicked off its policy easing cycle.
“The Fed says rate cuts from here on out will be gradual,” said Carl Weinberg, chief economist at High Frequency Economics. “Today’s claims data suggest there is no rush to ease monetary conditions. The Fed’s policy is aimed at supporting the economy and the labor market before a recession occurs.”
Initial claims for state jobless benefits fell by 10,000 to a seasonally adjusted 201,000 for the week ended Jan. 4, the lowest level since February 2024, the Labor Department said on Wednesday. Economists polled by Reuters had forecast 218,000 claims for the final week.
The report was released a day early because federal government offices were closed Thursday in honor of former President Jimmy Carter, who died on Dec. 29.
While claims are usually volatile at the turn of the year, they have bounced around levels associated with small layoffs that support the labor market and the broader economy. The four-week claims average, which strips out seasonal fluctuations from the data, fell by 10,250 last week to 213,000.
Unadjusted claims jumped by 22,430 in New York. There were also significant increases in Georgia and Texas. But the number of filings fell by 7,140 in Michigan, which has seen a large increase in claims related to layoffs in the auto industry.
There were also significant declines in Illinois, New Jersey, Ohio and Connecticut.
The dollar strengthened against a basket of currencies. US government bond yields were higher.
STABLE LABOR MARKET
The stability of the labor market was underlined by government data on Tuesday showing an increase in job openings in November, with 1.13 job vacancies for every unemployed person, up from 1.12 in October. Uncertainty about the impact of proposed policies from President-elect Donald Trump’s new administration also caused the Fed to pause rate cuts this month.
Trump has promised to cut taxes, impose or massively raise tariffs on imports and deport millions of undocumented immigrants, plans that economists have warned will fuel inflation.
The central bank cut its benchmark overnight interest rate by 25 basis points to a range of 4.25%-4.50% at its December policy meeting. However, the Fed only predicted two rate cuts this year, compared to the four it forecast in September. The reference rate was increased by 5.25 percentage points in 2022 and 2023 to tame inflation.
While layoffs remained low by historical standards, hiring slowed, with ADP National Employment on Wednesday showing that private payrolls rose by 122,000 jobs in December after a rise of 146,000 in November. Economists predicted an increase in private employment by 140,000.
Slow hiring means some people out of work face long periods of unemployment. The number of people receiving benefits after the first week of unemployment benefits rose by 33,000 to a seasonally adjusted 1.867 million in the week ended Dec. 28, the claims report showed.
Part of the rise in so-called permanent claims was attributed to difficulties in eliminating seasonal fluctuations. With the average duration of unemployment nearing a three-year high in November, economists will be hoping for an improvement when the government releases its closely watched employment report for December on Friday.
Nonfarm payrolls likely rose by 160,000 jobs in December, a Reuters survey showed, as the boost faded after the end of hurricane disruptions and strikes by factory workers at Boeing (NYSE: ) and another aerospace company.
The economy created 227,000 jobs in November. The unemployment rate is forecast to remain unchanged at 4.2 percent.
