The U.S. initial jobless claims falling to lowest level in nearly eight months, while continuing claims also dropped to a three-month low, signaling continued strength in the U.S. labor market.
Initial jobless claims fell to 211,000 last week, a decrease of 9,000 from the revised figure of 222,000 in the previous week, according to the Bureau of Labor Statistics (BLS) on January 2, marking the lowest level in eight months. The four-week moving average declined to 223,250, down 3,500 from the prior week’s revised average of 226,750.
Continuing jobless claims totaled 1,844,000, down by 52,000 from the revised figure of 1,896,000 the previous week, hitting a three-month low.
In September, the Federal Reserve expressed confidence in inflation returning to its 2% target and suggested that the labor market had cooled to a balanced state. However, further labor market cooling could raise the risk of deterioration, prompting the Fed to begin cutting rates.
Recent data, however, indicate sustained labor market resilience. Since peaking at 4.3% in July, the unemployment rate has gradually declined to the 4.1%-4.2% range. Nonfarm payrolls have remained at a healthy level of 100,000–200,000, and initial jobless claims have shown a steady downward trend since their July peak.
While continuing claims had climbed to a three-year high in recent months, this trend does not point to an economic recession or widespread layoffs. Instead, it reflects structural changes in the labor market.
Companies have reduced hiring rather than resorting to mass layoffs to scale down their workforce, resulting in longer job searches for unemployed individuals. This shift underscores that the labor market is moving toward equilibrium after years of overheating, rather than experiencing a substantial weakening.
The U.S. unemployment rate and nonfarm payroll data for December will be released on January 10. If the unemployment rate remains stable and nonfarm payrolls continue at healthy levels, it could further solidify expectations for a two-rate-cut scenario from the Fed this year. The progress of core inflation cooling will likely play a critical role in shaping the Fed's approach to adjusting its rate-cut trajectory.