Unemployment claims fell to the lowest level in a month, showing signs of health in the U.S. labor market amid a broader employment slowdown.
The number of first-time claims for the week ending Dec. 21 fell by 1,000 to 219,000, the Labor Department said Thursday. The average number of applications over the four-week period increased by 1,000 to 226,500.
Economists expected weekly claims to be between 224,000 and 225,000, and the market fell slightly on the news in morning trading, with the Dow Jones Industrial Average dropping 0.2%. It fell.
Despite sharp declines from 40-year highs over the past two years, continued strength in employment and price expectations has sent the market sharply lower in recent weeks as inflationary pressures continue to drag the economy.
Earlier this month, the Federal Reserve raised its forecast for 2025 inflation, as measured by the Consumer Expenditure Price Index, to 2.5% from 2.1%. The Fed also lowered its forecast for the unemployment rate and raised its forecast for gross domestic product (GDP) growth.
Uncertainty about the path of inflation within the Fed's interest rate setting committee has also increased, with the number of members rated high on uncertainty increasing from eight to 14.
In September, the Federal Reserve began cutting interest rates by a drastic 0.5 percentage points, after keeping interest rates unchanged from 5.25% to 5.5% the previous year. The move was seen by many as a sign of soaring post-pandemic inflation.
But firmer forecasts and increased uncertainty suggest inflation may still have some breathing space, with some market commentators even saying the size of September's rate cut was a mistake. .
Fed Chair Jerome Powell called December's rate cut “more close call” than other recent interest rate decisions, and Fed officials now expect to cut rates by only two quarters next year instead of four. There is.
“We see the risk as two-sided,” Powell said earlier this month. “Moving too slowly could unnecessarily harm economic activity and the labor market, or moving too quickly and unnecessarily harm inflation progress. Therefore, we must navigate between these two risks. I’m about to.”
However, broader disinflation and unemployment trends persist.
The unemployment rate is at 4.2%, up almost 1 percentage point from its 2023 low of 3.4%, and the annual increase is even though the consumer price index has risen in the last two readings. decreased from 9% in 2023 to 2.7%. The past two and a half years.
1.3% of the workforce is currently receiving unemployment benefits, the highest percentage since January 2022, the Labor Department reported Thursday.
More than 1.9 million job seekers now have insurance, the highest level since November 2021, when the unemployment rate was coming down from pandemic-induced highs.
Economists see strong U.S. incomes and spending and expect solid growth in 2025.
“U.S. personal income and consumption data should continue to show real income growth,” UBS economist Paul Donovan said in a December commentary. “The fact that household incomes are so strong that they can spend without using savings or credit card debt provides a solid foundation for U.S. economic growth in 2025.”
