The number of first-time applications for unemployment benefits in the United States dropped to the lowest level in over three years last week, indicating that despite recent announcements of layoffs by US companies, employers are largely retaining their employees.
The US Department of Labor reported on Thursday (December 4) that for the week ending November 29 (including the Thanksgiving holiday), the seasonally adjusted national initial claims for unemployment benefits decreased by 27,000 from the previous week to 191,000, reaching a new low since September 2022. This figure is lower than the economists’ expectations surveyed by Bloomberg and Reuters, who had anticipated 220,000 initial claims.
California saw a sharp decrease of 19,551 individuals applying for unemployment benefits, while Texas also reduced by 8,349 applicants. New York, Washington, and Florida also experienced significant decreases in the number of claims.
The four-week moving average of initial claims for unemployment benefits nationwide dropped to 214,750 last week, the lowest level since January of this year.
The weekly report on unemployment benefit applications released by the Labor Department is one of the most timely indicators of the health of the US economy. The national employment report issued by payroll processing company ADP on Wednesday showed a decrease of 32,000 private-sector jobs in the US in November, marking the largest decline in two and a half years, primarily driven by a decrease in employment in small businesses.
This report released by the Labor Department on Thursday eased concerns about a sharp deterioration in the US labor market but may also serve as a reason for the Federal Reserve to refrain from further interest rate cuts at its policy meeting next week.
Due to the challenge of comparing data around the Thanksgiving holiday, last week’s initial claims for unemployment benefits data may show a downward bias.
The significant drop in initial unemployment benefit claims last week does not alter the stagnant situation in the labor market. Layoffs remain common in certain sectors, and recruitment activities are at best in a modest state. A report released on Thursday by career consultancy firm Challenger, Gray & Christmas showed that US companies announced a total of 71,321 job cuts in November, a 54% increase compared to the same period last year, despite a decrease from the number of layoffs announced in October.
However, economists believe that the data on initial unemployment benefit claims reported on Thursday indicates that actual job cuts by US businesses are still limited.
The highly anticipated November employment report from the US Department of Labor, originally scheduled for release on Friday, will be delayed until December 16 due to the impact of the 43-day government shutdown.