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The number of Americans filing new applications for unemployment benefits dropped to the lowest level in more than three years last week, allaying fears of a sharp deterioration in labour market conditions and potentially arguing against another interest rate cut from the Federal Reserve next week.
The weekly unemployment claims report from the Labour Department yesterday, the most timely data on the economy’s health, followed on the heels of the ADP employment report on Wednesday showing private payrolls decreased by the most in more than 2-1/2 years in November.
Difficulties adjusting the data around the Thanksgiving holiday could have introduced some downside bias to claims last week. Still, economists said claims remained consistent with low levels of layoffs.
“Those job losses from other alternative measures of labour statistics may be overstating the weakness in the nation’s employment markets,” said Christopher Rupkey, chief economist at FWDBONDS. “The tea leaf readers at the Federal Reserve may need to recheck their figures because it certainly does not look like economic growth is in danger of stalling out.”
Initial claims for state unemployment benefits fell 27,000 to a seasonally adjusted 191,000 for the week ended November 29, the lowest level since September 2022. Economists polled by Reuters had forecast 220,000 claims for the latest week.
Unadjusted claims plunged 49,419 to 197,221 last week. The decline was more than double the 21,172 drop that had been anticipated by seasonal factors, the model that the government uses to strip out seasonal fluctuations from the data.
Filings tumbled 19,551 in California and decreased 8,349 in Texas. There were notable declines in applications in New York, Washington state and Florida.
Last week’s sharp drop in applications did not change the narrative of a stagnant labour market. Job cuts are prevalent in some segments of the economy and hiring is tepid at best. A separate report from global outplacement firm Challenger, Gray & Christmas showed planned job cuts by US-based employers declined 53 per cent to 71,321 in November.
But employers have announced about 1.171 million job cuts so far this year, up 54pc versus the first 11 months of 2024. Most of the layoffs have been in the technology sectors as companies integrate artificial intelligence in some roles.
The Bureau of Labour Statistics’ closely watched employment report for November, originally due on Friday, has been delayed because of a record 43-day shutdown of the government and will now be published on December 16.
The dollar was steady against a basket of currencies. US Treasury prices trimmed losses.
Economists view the labour market as remaining in a “no fire, no hire” state. US central bank officials meet next Tuesday and Wednesday to decide on interest rates. As many as five of the 12 voting policymakers on the central bank’s rate-setting Federal Open Market Committee have voiced opposition to or scepticism about cutting rates further, while a core of three members of the Washington-based Board of Governors wants rates to fall.
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