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The number of Americans applying for unemployment benefits fell sharply last week, a sign that U.S. job market remains resilient despite higher interest rates.
The Labor Department reported Wednesday that jobless claims dropped by 24,000 to 209,000. The previous week’s total — 233,000 — had been the highest since August. The four-week moving average of claims, which smooths out week-to-week volatility, fell by 750 to 220,000.
The applications are viewed as a proxy for layoffs. They remain extraordinarily low by historical standards, signalling that most Americans enjoy unusual job security.
Overall, 1.84 million Americans were receiving unemployment benefits the week that ended Nov. 11, down by 22,000 from the week before.
The Federal Reserve has raised its benchmark interest rate 11 times since March 2022 to slow the economy and rein in inflation that hit a four-decade high last year. The job market and economic growth remained surprisingly resilient, defying predictions that the economy would slip into a recession this year.
But hiring has slowed from the breakneck pace of 2021 and 2022 when the economy roared back unexpectedly from the COVID-19 recession.
Employers added a record 606,000 jobs a month in 2021 and nearly 400,000 last year. So far in 2023, monthly hiring has averaged a still-solid 239,000, but it’s come in below 200,000 in three of the last five months.
Employers are also posting fewer job openings.
“But job growth remains strong, the unemployment rate remains historically low, and businesses have yet to start reducing their workforce in a significant way,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “We expect some softening in labor demand going forward as the effects of restrictive monetary policy spread more broadly through the economy.”
At the same time, inflation has decelerated markedly. In June 2022, consumer prices were up 9.1% from a year earlier. Last month, year-over-year inflation was down to 3.2%, though it remained above the Fed’s 2% target.
The combination of a slowing but durable job market and tumbling inflation rates has raised hopes that the Fed can manage a so-called soft landing — slowing economic activity enough to control inflation without tipping the United States into a recession.
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