U.S. claims for unemployment benefits dropped to the lowest level seen in almost a year, indicating a robust labor market characterized by historically low layoffs.

On Wednesday, the Labor Department reported that jobless benefit applications fell to 201,000 for the week ending January 4, compared to the previous week’s count of 211,000. This week’s figure marks the lowest level since February of the prior year.

The four-week moving average of claims, which smooths out fluctuations, decreased by 10,250 to a total of 213,000.

In contrast, the overall number of individuals receiving unemployment benefits increased to 1.87 million for the week of December 28, representing a rise of 33,000 from the week before.

The U.S. job market, while showing signs of slowing from the extraordinarily dynamic period of 2021-2023, still remains resilient as the economy adjusted from the impacts of COVID-19 restrictions.

By November, employers had added an average of 180,000 jobs monthly in 2024, compared to 251,000 in 2023, 377,000 in 2022, and an all-time peak of 604,000 in 2021. Despite the reduction in job creation, the current pace still reflects a sturdy economic environment, particularly against the backdrop of high interest rates.

Upcoming hiring data scheduled for release by the Labor Department on Friday is anticipated to indicate that employers added about 160,000 positions in December.

Additionally, on Tuesday, the government revealed an unexpected rise in U.S. job openings in November, demonstrating that many companies are continuing to seek employees even as the labor market shows signs of relaxation. Job openings climbed to 8.1 million in November, which is the highest figure since February, an increase from the 7.8 million openings reported in October.

Weekly jobless claims serve as an indicator of layoffs, remaining below levels seen prior to the pandemic. Currently, the unemployment rate stands at a relatively modest 4.2%, an increase from the record low of 3.4% observed in 2023.

To combat inflation that surged to a 40-year high two and a half years ago, the Federal Reserve implemented 11 interest rate hikes during 2022 and 2023. Inflation has since decreased—falling from 9.1% in mid-2022 to 2.7% in November—allowing the Fed to begin reducing rates. However, progress against inflation has begun to stall recently, with yearly consumer price increases remaining above the Fed’s 2% goal.

In December, the Federal Reserve executed its third interest rate cut in 2024, yet central bank officials have indicated they will likely exercise caution regarding any further reductions. They now project only two rate cuts in 2025, down from the four initially expected in September.