US initial jobless claims fell by 6,000 last week, signalling low layoffs and a stable labour market. However, rising interest rates, tariffs and inflation risks could weigh on hiring in the coming year
The number of Americans filing new claims for unemployment benefits fell to near 57-year lows last week, indicating that layoffs remain subdued and the US labour market continues to show resilience, according to Reuters.
Initial claims for state unemployment benefits dropped by 6,000 to a seasonally adjusted 194,000 in the week ended October 17, the US Labor Department said on Thursday. The figure was below economists’ expectations of 200,000 claims in a Reuters poll.
The latest reading puts weekly jobless claims close to the 189,000 level recorded in mid-July, the lowest since 1969, highlighting the continued stability of the US labour market despite economic uncertainty.
Economists have attributed the low level of layoffs to strong domestic demand and rising corporate profits, which have helped companies retain workers. However, tighter financial conditions, higher borrowing costs and inflationary pressures linked to the US-Israeli war with Iran could undermine labour market conditions next year, Reuters reported.
US labour market remains in a low-hire, low-fire phase
The labour market continues to reflect a low-hire, low-fire environment, in which employers are reluctant to recruit aggressively but are also avoiding widespread layoffs. Uncertainty surrounding the Middle East conflict and US import tariffs has weighed on hiring activity.
US nonfarm payrolls increased by 29,000 in September, following a rise of 133,000 in August. The latest jobless claims data covered the period when the government surveyed businesses for October’s employment report.
Meanwhile, continuing claims, which measure the number of people receiving unemployment benefits after their initial week of assistance, rose by 25,000 to a seasonally adjusted 1.728 million in the week ended October 10.
However, continuing claims do not capture recent college graduates and other job seekers who are ineligible for unemployment benefits because of limited work history. The number may also be constrained by people exhausting their eligibility for benefits, which is generally limited to 26 weeks in most US states.
The median duration of unemployment stood at 11.5 weeks in September, close to a four-and-a-half-year high. Nevertheless, the US unemployment rate remained at 4.2 per cent in September, suggesting that labour market conditions are not currently adding significantly to inflationary pressures, Reuters reported.
Federal Reserve rate outlook in focus
The latest labour market data could influence the Federal Reserve’s approach to monetary policy as it assesses inflation risks arising from the Middle East conflict.
The United States raised its benchmark overnight interest rate by 25 basis points in September, taking the target range to 3.75-4.00 per cent.
Economists expect the Fed to keep interest rates unchanged at its meeting next week, while anticipating another rate hike in December, according to Reuters.
Although low jobless claims point to continued labour market resilience, the outlook remains uncertain as policymakers weigh persistent inflation risks against signs of slower hiring and tighter financial conditions.