U.S. applications for unemployment benefits fell to their lowest level in more than three years during Thanksgiving week, potentially complicating the Federal Reserve’s upcoming decision on interest rates.
The number of Americans applying for jobless benefits for the week ending Nov. 29 fell to 191,000 from the previous week’s 218,000, the Labor Department reported Thursday. That’s the lowest level since September 24, 2022, when claims came in at 189,000. Analysts surveyed by the data provider FactSet had forecast initial claims of 221,000.
Kathy Bostjancic, chief economist at Nationwide, said that unemployment benefit filings are often distorted by the Thanksgiving holiday, which can cause some people who may have lost jobs to delay filing claims.
Still, the low claims figure also suggests that overall layoffs remain muted, despite the high-profile announcements. Hiring is also sluggish, which makes finding a job for those out of work challenging.
“The labor market is kind of frozen,” Bostjancic said. “Companies are in wait-and-see mode.”
Applications for unemployment aid are viewed as a proxy for layoffs and are close to a real-time indicator of the health of the job market. The job cuts announced recently by large companies such as UPS, General Motors, Amazon, and Verizon typically take weeks or months to fully implement and may not be reflected in Thursday’s data.
For now, the U.S. job market appears stuck in a “low-hire, low-fire” state that has kept the unemployment rate historically low.
On Wednesday, private payroll data firm ADP estimated U.S. job losses of 32,000 in November. The surprisingly weak report may be discouraging for people looking for jobs, but it bolstered expectations that the Fed will cut its main interest rate next week.
It’s not clear how much weight this week’s layoff figures will carry with the Fed as the numbers can be volatile and prone to revisions.
Complicating the Fed’s upcoming decision is inflation, which remains above the central bank’s 2% target. The Fed’s preferred measure of inflation will be released in a government report on Friday and will also be factored into its rate call on Wednesday.
Two weeks ago, the government said that hiring picked up a bit in September, when employers added 119,000 new jobs. That mixed report, which also showed employers had shed jobs in August, was delayed due to the government shutdown. The unemployment rate ticked up to 4.4%, its highest level in four years.
November’s comprehensive jobs data has been delayed for release until later this month, after the Fed’s meeting, also due to the government shutdown.
The government also recently reported that retail sales slowed in September after three months of healthy increases.
Consumer confidence has plunged to its second-lowest level in five years, while wholesale inflation eased a bit.
The data suggests that both the economy and inflation are slowing, which has boosted financial markets’ expectations that the Federal Reserve will reduce its key interest rate at its meeting next week. If the Fed does reduce its benchmark rate next week, it would be the third cut of the year as it attempts to support a job market that has been slowing for months.
Thursday’s report from Labor also showed that the four-week average of claims, which evens out some of the week-to-week volatility, fell by 9,500 to 214,750.
The total number of Americans filing for jobless benefits for the previous week ending Nov. 22 dipped by 4,000 to 1.94 million, the government said.
–Matt Ott, AP business writer
AP Economics Writer Christopher Rugaber contributed to this report.