New jobless claims fell to a 16-month low in mid-January, showing that demand for U.S. workers remains extremely high despite efforts by the Federal Reserve to cool the labor market. This is the latest sign of this.
The number of unemployment insurance claims fell by 16,000 to 187,000 from the previous week's revised figure of 203,000, the Labor Department said Thursday.
Economists had expected the number of insurance claims to rise to 208,000. The downside surprise indicates that analysts are still underestimating the strength of the labor market.
The claim is a proxy for dismissal. The low number of applications suggests that few employers will cut jobs as the new year begins, even though many economists say growth will slow significantly this year.
In December, employers cut 216,000 jobs, much more than expected. The unemployment rate remained stable at an extremely low level of 3.7%.
Fed officials believe that the labor market is so tight that the economy is becoming more vulnerable to inflation. Shocks to global supply chains, such as the recent attack on a container ship in the Red Sea, have increased the risk of rising inflation.
The number of continued applications filed after the first week of benefits fell by 26,000 to 1.806 million. This is the lowest level since October of last year and suggests workers who have been laid off by their previous employer are finding new jobs more easily.
A tighter labor market could make it harder for the Fed to justify rate cuts early in the year. Fed officials said they are closely watching data, especially conditions in the labor market, to determine the timing and extent of rate cuts next year.
