US Jobless Claims Edge Up But Layoffs Stay Low Amid Fed Rate Cuts

The number of Americans filing for unemployment benefits saw a slight increase last week, with 3,000 more jobless aid applications pushing the total to 221,000, according to the Labor Department's report on Thursday.

This figure, while slightly higher, remains below analysts' expectations of 227,000, indicating a continued strength in the labor market despite recent economic headwinds.

Steady Decline in Four-Week Average of Claims

The four-week average for jobless claims, which helps to smooth out weekly volatility , dropped by 9,750 to 227,250 reflecting a broader stability in the job market. Applications for jobless benefits, widely viewed as an indicator of layoffs, have remained relatively low throughout the year.

Although there have been signs of a gradual slowdown, the labor market is holding firm, even amid the Federal Reserve 's recent shifts in monetary policy aimed at balancing inflation and employment levels.

Fed Shifts Focus With Rate Cuts to Support Job Market

Amid signs of cooling inflation and weaker job growth data, the Federal Reserve cut its benchmark interest rate in September by half a percentage point, marking its first rate cut since 2019.

This move was part of a broader effort to ease financial pressures on businesses and consumers, with the Fed aiming for a "soft landing" — a delicate attempt to bring down inflation without triggering a recession.

Later on Thursday, the Fed is expected to lower the rate again by a quarter point, in response to favorable inflation trends and a steady deceleration in job growth.

Jerome Powell, the Fed chair, recently expressed optimism about the inflation trajectory , noting that it is largely under control as it nears the Fed's two percent target. Last week, a closely watched inflation measure dropped to its lowest level in more than three years, reinforcing expectations that the Fed may continue to support economic stability through rate adjustments.

Cooling Job Market Points to Soft Landing Goal

Jobless claims have stayed relatively low this year, averaging around 213,000 per week in early 2024 before increasing slightly in May and reaching 250,000 in July. Economists believe the higher interest rates implemented earlier by the Fed have contributed to a slight cooling of the labor market, yet layoffs remain low by historical standards.

In October, the U.S. economy added only 12,000 jobs, with analysts attributing the modest growth to temporary disruptions including strikes and natural disasters .

Revisions from the Labor Department in August showed that U.S. job growth from April 2023 through March 2024 was 818,000 jobs lower than initially reported, adding to evidence that the labor market has been gradually slowing. This has strengthened the Fed's resolve to adopt rate cuts aimed at supporting employment without igniting inflation.

This includes reporting from The Associated Press