The number of Americans filing new claims for unemployment benefits unexpectedly fell last week to its lowest level in a month, but the jobless rate likely remained high in December due to slow hiring.
Initial claims for state unemployment benefits decreased by 16,000 to a seasonally adjusted 199,000 during the week ending Dec. 27, the Labor Department reported Wednesday. Economists polled by Reuters had forecast 220,000 claims for the latest week. The report was published a day early due to the New Year holiday.
Claims have been volatile in recent weeks due to difficulties adjusting data for seasonal fluctuations ahead of the holiday season. The labor market remains stuck in what economists and policymakers describe as a “don’t hire, don’t fire” mode.
Although the economy remains resilient, with gross domestic product rising at its fastest pace in two years in the third quarter, the labor market has virtually stagnated. Demand and supply of labor were affected by import tariffs and restrictive measures against migration, according to economists.
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The number of people receiving unemployment benefits after an initial week of aid, an indicator of hiring, decreased by 47,000 to a seasonally adjusted 1.866 million during the week ending Dec. 20, the claims report indicates.
While far from their recent high, continuing claims are higher than this time last year, and this high level is consistent with a survey conducted by the Conference Board last week, showing that consumer perceptions of the labor market deteriorated this month to levels not seen since early 2021.
The unemployment rate rose in November to a four-year high of 4.6%, although part of the increase was due to technical factors related to the 43-day government shutdown.
A gauge of the unemployment rate from the Federal Reserve Bank of Chicago suggests it remained unchanged in December at 4.6%, the highest level in more than four years. The Labor Department will release December employment numbers on January 9.
The record-long government shutdown prevented the collection of data on the October unemployment rate. This month, the Federal Reserve cut its benchmark overnight rate by another 25 basis points to the 3.50-3.75% range, but noted that borrowing costs were unlikely to fall in the near term as policymakers await clarity on the direction of the labor market and inflation.
With information from Reuters
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