WASHINGTON – The United States experienced a reduction in new unemployment benefit applications for the week ending December 27, signaling continued low levels of layoffs despite indicators of a cooling labor market. The Labor Department reported that initial jobless claims decreased by 16,000, reaching 199,000 compared to the prior week's 215,000. These figures were also below analysts’ projection of 208,000, based on a FactSet survey.
It is important to note that jobless claim data often fluctuates during holiday-shortened weeks, as some displaced workers may delay filing their claims. This report, released a day early due to the New Year holiday, sheds light on the labor market's health by offering a near real-time look at layoff activity.
In recent government employment figures, the U.S. showed modest job gains of 64,000 in November but a significant loss of 105,000 in October, largely due to reductions in federal employment. Much of this decline came from 162,000 fewer federal workers following extensive payroll cuts linked to measures implemented at the end of fiscal year 2025 on September 30, including reductions under high-profile leadership changes.
Further revisions by the Labor Department adjusted August and September payroll figures downward by a combined 33,000 positions, illustrating prevailing uncertainty in labor market metrics. Since March, monthly employment growth has slowed, averaging 35,000 new jobs compared to 71,000 annualized growth in the preceding year.
Multiple factors contribute to this moderation in hiring, including uncertainty surrounding trade policies and ongoing impacts from the Federal Reserve’s interest rate increases throughout 2022 and 2023 aimed at combatting inflation sparked by the pandemic. The Federal Reserve has recently lowered its benchmark interest rate three consecutive times by a quarter-point each, signaling concerns over labor market strength.
Federal Reserve Chair Jerome Powell indicated that job market conditions may be weaker than initial numbers suggest, with estimates that revisions could lower reported job gains by as much as 60,000. This would imply an average monthly employment loss of approximately 25,000 jobs since spring, highlighting underlying fragilities.
Several major employers, including United Parcel Service, General Motors, Amazon, and Verizon, have recently announced job reductions, illustrating ongoing corporate caution.
The Labor Department’s report also highlighted that the four-week moving average of unemployment claims edged slightly upward by 1,750, reaching 218,750. Meanwhile, continuing claims for the week ending December 20 decreased by 47,000 to 1.87 million, maintaining a low level of ongoing unemployment benefits recipients.