US applications for jobless aid fall to 206,000 last week as layoffs remain low

U.S. unemployment claims dropped unexpectedly last week, suggesting the labor market remains resilient despite recent high-profile layoff announcements and conflicting economic signals.

Applications for unemployment benefits fell by 23,000 to 206,000 for the week ending February 14, the Labor Department reported Thursday. The figure came in well below economists’ expectations of 225,000 claims, according to data compiled by FactSet.

Weekly unemployment claims, considered a proxy for layoffs, have largely remained in a historically low range between 200,000 and 250,000 for several years. This trend suggests employers continue to retain workers despite economic uncertainties.

The latest jobless claims data follows a surprisingly robust January jobs report that showed U.S. employers added 130,000 positions, with the unemployment rate ticking down to 4.3% from 4.4%. However, this positive news was tempered by significant downward revisions to previous employment figures.

Government statisticians recently slashed 2023’s job creation estimates by more than 400,000 positions. The revisions revealed that only 181,000 jobs were created last year—just one-third of the originally reported 584,000 and the weakest annual performance since the pandemic-ravaged economy of 2020.

The contradictory signals have created a puzzling economic narrative. While major employers including UPS, Amazon, Dow Chemical, and the Washington Post have announced workforce reductions in recent weeks, the broader layoff data remains relatively stable.

“We’re seeing a fascinating dichotomy in the labor market right now,” said Michael Peterson, chief economist at Capital Economics. “Headlines about tech and media layoffs create the perception of widespread job cuts, but the data suggests these remain concentrated in specific sectors rather than representing a broader economic deterioration.”

The labor market landscape has shifted significantly over the past year. Job openings fell in December to their lowest level in more than five years, indicating reduced hiring appetites among employers. Many businesses have adopted a cautious stance amid uncertainties stemming from volatile trade policies and the lingering effects of the Federal Reserve’s aggressive interest rate hikes in 2022 and 2023.

These rate increases, designed to combat post-pandemic inflation, have cooled economic activity across various sectors. Housing market activity has slowed substantially, manufacturing has struggled to gain momentum, and business investment has remained tepid.

Despite these headwinds, the overall economy has maintained solid growth. U.S. GDP increased at a robust 3.3% annualized rate in the fourth quarter of 2023, outpacing many analysts’ expectations. This disconnect between economic growth and labor market sluggishness has perplexed many economists.

“The productivity gains we’re seeing suggest companies are finding ways to produce more with fewer workers,” noted Jennifer Briggs, labor economist at Moody’s Analytics. “Whether that’s sustainable long-term remains an open question.”

The mixed economic signals have complicated the Federal Reserve’s decision-making regarding interest rates. Some Fed officials have argued that last year’s anemic hiring demonstrates that higher borrowing costs are weighing too heavily on growth. However, January’s unexpected job gains could undermine that perspective.

The central bank is now carefully analyzing incoming data before deciding when to begin cutting interest rates from their 23-year high. Market participants had previously anticipated rate cuts as early as March, but stronger economic and employment data have pushed those expectations to later in the year.

Thursday’s report also showed that the four-week moving average of jobless claims, which smooths out week-to-week volatility, decreased slightly by 1,000 to 219,000. Meanwhile, the total number of Americans collecting unemployment benefits rose by 17,000 to 1.87 million for the week ending February 7.

As economic crosscurrents continue to buffet the labor market, both policymakers and businesses face difficult decisions amid persistent uncertainty about the path forward.