Fresh data from the United States indicates a continued resilience in the country's labour market, with new applications for unemployment benefits falling unexpectedly last week. This comes amid a broader economic landscape where hiring has shown signs of slowing down.
Key Data Points: A Surprise Drop in Claims
According to the Labor Department, initial claims for state unemployment benefits dropped by 10,000 to a seasonally adjusted 214,000 for the week that ended on December 20. This figure was revised down from 224,000 reported for the previous week. The latest number significantly undershot economist expectations, who had forecast 232,000 claims according to a FactSet survey.
The report, released a day earlier due to the Christmas holiday, reinforces the view that the US jobs market remains on stable footing. Initial claims are closely watched as a near real-time proxy for layoffs across the nation, and the current level is still within a range considered historically healthy for the economy.
Mixed Signals from the Broader Employment Picture
The weekly claims data presents a somewhat contrasting picture to other recent employment reports. The government's monthly data showed the US economy added a net of 64,000 jobs in November, following a loss of 105,000 positions in October. The national unemployment rate also climbed to 4.6% in November, marking its highest point since 2021.
A deeper look reveals specific pressures. The sharp decline in October payrolls was largely driven by a loss of 162,000 federal jobs, attributed to workers leaving after the fiscal year-end and administrative cutbacks. Furthermore, earlier employment figures for August and September were revised downward by a combined 33,000 jobs.
Since March, monthly job creation has averaged approximately 35,000, which is nearly half the pace witnessed in the year leading up to March. This slowdown is seen as businesses navigate uncertainties surrounding trade policies and the lagged effects of the Federal Reserve's aggressive interest rate hikes in 2022 and 2023.
Central Bank Caution and Corporate Layoffs
Acknowledging potential softness, the Federal Reserve recently cut its benchmark interest rate by 25 basis points for the third meeting in a row. Fed Chair Jerome Powell indicated the decision was partly influenced by concerns that the labour market might be weaker than the headline numbers suggest. He cautioned that recent job data could eventually be revised lower by as much as 60,000.
This caution finds some grounding in announcements from several large corporations. Companies like UPS, General Motors, Amazon, and Verizon have all publicised job cuts in recent months. However, such reductions often take time to filter through and be fully captured in the official weekly claims data.
The Labor Department report also provided other insights. The four-week moving average for claims, which smooths out weekly volatility, edged down by 750 to 216,750. Conversely, continuing claims, which represent the number of people already receiving unemployment benefits, rose by 38,000 to 1.92 million for the week ending December 13.
In summary, while the latest drop in jobless claims points to underlying stability and a still-tight labour market, broader indicators and corporate announcements suggest a period of cooling momentum and heightened caution among both policymakers and businesses.
