U.S. jobless claims stay near multi-decade lows as labor market holds firm

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U.S. jobless claims stay near lows

Highlights

Initial jobless claims fell by 1,000 to a seasonally adjusted 194,000 for the week ended October 24, beating Reuters expectations of 199,000.
Continuing unemployment claims dropped by 21,000 to 1.701 million for the week ended October 17, supporting a steady or potentially lower October unemployment rate from September's 4.2%.
The Federal Reserve kept its benchmark interest rate at 3.75%-4.00% but is expected to raise rates in December amid strong labor market data and elevated inflation.

Labor data signal stable employment conditions

As reported by Reuters, citing the U.S. Labor Department, initial claims for state unemployment benefits fell by 1,000 to a seasonally adjusted 194,000 in the week ended October 24. Economists polled by Reuters had expected 199,000 claims for the latest week.

Claims have stayed mostly below 200,000 since mid-September and remain close to the 189,000 level reached in mid-July, which is the lowest reading since 1969. Economists describe the labor market as being in a low-hire, low-fire state, with strong profits and resilient domestic demand helping keep layoffs near historic lows.

The number of people receiving unemployment benefits after an initial week of aid, a proxy for hiring, dropped by 21,000 to a seasonally adjusted 1.701 million in the week ended October 17. Those continuing claims correspond to the period during which the government surveys households for October's unemployment rate.

Rate outlook shaped by labor supply and Fed policy

The unemployment rate stood at 4.2% in September and could remain steady or edge lower in October after a Conference Board survey on Tuesday showed consumers were more optimistic about the labor market. A reduction in the labor force amid the Trump administration's immigration crackdown is also seen as a key factor keeping the jobless rate low.

The Federal Reserve on Wednesday left its benchmark overnight interest rate in the 3.75% to 4.00% range while acknowledging that inflation remains elevated. Economists expect the U.S. central bank to raise rates in December, and Fed Chairman Kevin Warsh told reporters that conditions on the employment side of the Fed's dual mandate are quite positive.

At the same time, economists say the ongoing U.S.-Israeli war with Iran is making employers more hesitant to increase headcount, even as broader labor market stability persists.

In our earlier article, we covered the intensifying internal debate at the Federal Reserve over how much policymakers should communicate publicly ahead of the next rate decision. We noted that a steady stream of official remarks helped moderate markets’ expectations for further tightening after September’s hike, even as inflation data kept the path for rates uncertain.

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