Jobless claims drop to nearly three-month low of 202,000

The numbers: The number of Americans who applied for unemployment benefits in the final week of 2023 fell to a nearly three-month low of 202,000, suggesting that a softening labor market still has plenty of residual strength.

New jobless claims declined by 18,000 from a revised 220,000 in the prior week, the government said Thursday.

Economists had forecast new claims in the week ending Dec. 30 to total 219,000.

People apply for benefits after getting laid off. New claims are still quite low historically even though hiring has tapered off.

Key details: New jobless claims fell in 31 of the 53 states and territories that report these figures to the federal government. They rose in 22 other states.

The number of people collecting unemployment benefits in the U.S., meanwhile, fell by 31,000 to 1.85 million. Still, a gradual rise in these so-called continuing claims over the past year is a sign it’s taking longer for people to find new jobs.

The caveat: New jobless claims tend to jump up and down around the holiday shopping that stretches from Thanksgiving until late January because of temporary hiring. Economists prefer to wait until February before trying to glean broader trends in the labor market.

Big picture: Higher interest rates have slowed the economy and reduced the need for businesses to hire more workers.

The U.S. is still growing fast enough to encourage companies to hold onto most of their current workers, especially in light of the worst labor shortage since World War II. That’s a good sign for the economy.

Looking ahead: “The initial claims data are consistent with labor market conditions that are loosening but not unraveling and still characterized by relatively few layoffs,” said lead U.S. economist Nancy Vanden Houten of Oxford Economics.

Market reaction: The Dow Jones Industrial Average
DJIA
and S&P 500
SPX
were set to open higher in Thursday trading.

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