Initial Jobless Claims Fall to Eight-Month Low, Signaling Labor Market Stabilization
The U.S. Department of Labor reported Thursday that initial jobless claims fell by 9,000 to 211,000 in the week ending in late 2024, hitting an eight-month low, indicating the labor market has remained stable after showing signs of weakness mid-year. This data reinforces Federal Reserve officials' forecasts from last month that the pace of rate cuts may slow in 2025. Market expectations for the Fed to hold rates steady at its January 29 meeting have risen from 57% to 89%.
At a Glance
- The U.S. Labor Department reported Thursday that initial jobless claims fell to an eight-month low in the week ending late 2024, underscoring the stability of the labor market after signs of weakness emerged mid-year.
- New ClaimsDecreased by 9,000 to 211,000(for the week ending Saturday), validating the Federal Reserve officials' forecast last month that the pace of rate cuts in 2025 may slow compared to September projections.
- The decline in claims "reinforces the case for a pause in rate cuts," Joe Mazzola, head of trading and derivatives strategy at Charles Schwab, said ina statement.。
In-Depth Analysis
Over the past month, interest rate futures traders have raised the probability that the Fed will hold the federal funds rate steady at the end of its two-day meeting on January 29 from 57% to 89%,according to the CME FedWatch tooldata.
The Fed cut its key rate by 25 basis points to a 4.25%-4.5% range on December 18, marking the third consecutive cut since September. Cleveland Fed President Beth Hammack dissented, citing inflation risks.
In the median projections from the December meeting, Fed officials expect to lower the key rate to3.9%by the end of 2025, 50 basis points higher than September forecasts.
"We are at or near the point where it is appropriate to slow the pace of further adjustments to the benchmark rate," Fed Chair Jerome Powell said at a press conference following the policy decision.said.。
The unemployment rate has risen to 4.2% from 3.7% early last year. Policymakers cited cooling labor market conditions when they lowered borrowing costs in September.
Fed officials in their median projections expect the unemployment rate to remain stable at 4.3% for the end of 2024, 2025, and 2026.
"The downside risks to the labor market appear to have diminished," Powell said at the press conference.
"But the labor market is now looser than before the pandemic, and it is clearly still cooling, albeit in a gradual and orderly manner," he added.
The decline in initial jobless claims at the end of December may be a fluke, Samuel Tombs, chief economist at Pantheon Macroeconomics, said in a post on X on Thursday.
"Last week's initial claims fell to the lowest level since the final full week of April, almost certainly due to imprecise seasonal adjustment," Tombs said. "Claims also fell in the last week of 2023, then rebounded."