Initial claims for unemployment benefits fell to the lowest level in 16 months in mid-January, the latest sign that demand for workers in the U.S. remains extremely high despite efforts by the Federal Reserve to cool off the labor market.
Jobless claims fell by 16,000 to 187,000 from a revised 203,000 in the prior week, the Department of Labor said Thursday.
Economists had forecast 208,000 claims. The downward surprise is an indication that analysts are still underestimating the strength of the labor market.
Claims are a proxy for layoffs. The low level of claims indicates that few employers are shedding workers as the new year begins even though many economists say growth will slow significantly this year.
In December, employers expanded their payrolls by 216,000, far more than what was expected. The unemployment rate held steady at the ultralow rate of 3.7 percent.
Fed officials believe a very tight labor market makes the economy more vulnerable to inflation. The danger of rising inflation is heightened by shocks to global supply chains such as the recent attacks on container ships in Red Sea.
Ongoing claims, those filed after the first week of benefits, fell by 26,000 to 1,806,000. That’s the lowest level since October of last year, suggesting that employees are finding new jobs more easily after being let go by their previous employers.
A tightening labor market could make it harder for the Federal Reserve to justify cutting rates early this year. Fed officials have said they are closely watching data, especially labor market conditions, to determine the timing and extent of rate cuts in the coming year.
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