WASHINGTON — U.S. applications for unemployment benefits fell to their lowest level in 15 weeks as the job market continues to show resiliency in the face of attempts by the Federal Reserve to cool the economy.
The number of Americans applying for jobless aid for the week ending Jan. 7 fell by 1,000 to 205,000, from 206,000 the week before, the Labor Department said today. Last week’s number was revised up by 2,000 to 206,000.
The four-week moving average of claims, which softens some of the week-to-week volatility, fell by 1,750 to 212,500.
Jobless claims are generally viewed as a proxy for layoffs, which have been relatively low since the pandemic wiped out millions of jobs in the spring of 2020.
The labor market is closely monitored by Federal Reserve policymakers, who raised interest rates seven times last year in a bid to slow job growth and bring down stubbornly high inflation.
Last week the government reported that U.S. employers added a solid 223,000 jobs in December, evidence that the economy remains healthy even as the Fed is rapidly raising interest rates to try to slow economic growth and the pace of hiring. The unemployment rate fell to 3.5%, matching a 53-year low.
Even with the solid numbers, December’s jobs report suggested that the labor market may be cooling in a way that could aid the Fed’s fight against high inflation. It was the smallest gain in two years, and it extended a hiring slowdown that began last year. Average hourly pay growth eased to its slowest pace in 16 months. That slowdown could reduce pressure on employers to raise prices to offset their higher labor costs.
Also today, the government reported that rising consumer prices in the United States moderated again last month, bolstering hopes that inflation’s grip on the economy will continue to ease this year and possibly require less drastic action by the Federal Reserve to control it.
Inflation eased to 6.5% in December compared with 12 months earlier, the government said. It was the sixth straight year-over-year slowdown. On a monthly basis, prices actually slipped 0.1% from November to December, the first such drop since May of 2020.
In forecasts updated last month, the Fed’s policymakers predicted slower growth and higher unemployment for next year and 2024. The unemployment rate is projected to jump to 4.6% by the end of 2023. That would mark a significant increase in joblessness and typically would reflect a recession, which many economists have predicted.
The Fed’s rate hikes last year have made it more expensive for consumers to take out mortgage and auto loans, and raised borrowing rates for credit cards.
Mortgage rates are above 6%, essentially double what they were before the Fed began tightening credit. Higher mortgage rates have hammered the housing market, with sales of existing homes declining for 10 straight months.
Though the U.S. labor market remains robust, layoffs have been mounting in the technology sector, which is dealing with falling demand as inflation squeezes both businesses and families.
Last week, Amazon announced that it is laying off 18,000 workers, while the software company Salesforce, owner of Slack, said it was cutting around 8,000 jobs. Facebook parent Meta, Twitter, Doordash and others have announced cuts in recent months as well.
About 1.63 million people were receiving jobless aid the week that ended Dec. 31, a decline of 63,000 from the week before.