The latest data indicates a decline in the number of Americans filing for unemployment benefits, reaching the lowest point since March. This trend reinforces the notion that job security remains robust for a significant portion of U.S. workers.
According to the Labor Department, jobless claims decreased by 9,000, bringing the total to 211,000 for the prior week. The four-week moving average for claims, which mitigates weekly fluctuations, also fell by 3,500 to 223,250.
Moreover, the number of individuals receiving unemployment benefits plummeted by 52,000, settling at 1.84 million, marking the lowest total since September. Economists at Jefferies, Thomas Simons and Sam Saliba, described this decline as “encouraging.” However, they noted that shifts in seasonal patterns around the holiday season could potentially distort the figures.
The U.S. labor market has shown signs of cooling compared to the exceptional hiring pace witnessed during 2021-2023, a period characterized by the economy’s recovery from the COVID-19 pandemic. Up until November, employers have been adding approximately 180,000 jobs monthly in 2024. This figure stands in stark contrast to the averages of 251,000 in 2023, 377,000 in 2022, and a remarkable 604,000 in 2021. Nevertheless, these current job creation levels remain sturdy and reflect a degree of resilience despite the backdrop of elevated interest rates.
On January 10, the Labor Department is set to release employment statistics for December, which are anticipated to reveal that employers contributed an additional 160,000 jobs in the last month.
Weekly jobless claims provide insight into layoffs, and the data shows that these have remained considerably lower than pre-pandemic figures. Currently, the unemployment rate stands at a manageable 4.2%, notably up from the all-time low of 3.4% recorded in 2023.
To combat inflation, which surged to a 40-year peak two and a half years ago, the Federal Reserve executed 11 interest rate hikes throughout 2022 and 2023. This strategic move effectively reduced inflation from a high of 9.1% in mid-2022 to 2.7% by November, providing the Fed with the opportunity to begin lowering rates. However, recent months have seen a plateau in inflation progress, with year-over-year consumer price increases continuing to exceed the Fed’s target of 2%.
During its December meeting, the Federal Reserve cut its benchmark interest rate for the third time in 2024. Nonetheless, the central bank’s policymakers have indicated a shift towards a more cautious approach in future rate reductions, projecting only two cuts in 2025, a decrease from the previously anticipated four cuts outlined in September.
