The number of new applications for unemployment benefits unexpectedly dropped by 3,000 to 183,000 last week, the Labor Department reported Thursday.
Falling jobless claims are a sign that layoffs are relatively rare and the labor market is resilient despite the Federal Reserve’s historic effort to tighten monetary policy to slow economywide spending and drive down inflation. Thursday’s decline marks the lowest weekly jobless claims since April 2022.
The weekly jobless claims number has been closely watched over the past year or so, given the Fed’s aggressive pace of rate hikes. The report comes after the central bank raised rates by a quarter of a percentage point Wednesday.
FED SLOWS ITS RATE-HIKING CAMPAIGN EVEN MORE AS INFLATION STARTS TO ABATE
The economy added 223,000 more jobs in December, the Bureau of Labor Statistics reported last week, and the number of people applying for jobless claims each week (a forward-looking indicator of the labor market weakening) also shows no evidence of seriously increasing.
While the number of new jobless claims has remained low enough to avert fear that the country is already in the throes of a recession, most economists anticipate the U.S. economy will enter a Fed-induced recession at some point in the year. That is because rate hikes can take a while to filter through the broader economy and create recessionary conditions and job losses.
It is expected that as the rate hikes start to ripple across the economy, jobless claims will begin to tick up, and then monthly job gains will decline.
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Meanwhile, inflation is beginning to come down with the rate hikes.
The consumer price index, the most familiar gauge for the broader public, shows that overall inflation has declined from above 9% in June to 6.5% in December — well above the Fed’s 2% target but a meaningful decline.
