Jobless claims fell by 20,000, the lowest level in two months

The number of Americans filing for unemployment benefits fell sharply last week, a sign of a strong labor market even as the Federal Reserve continues to raise interest rates to cool the economy and slow inflation.

The Labor Department reported Thursday that jobless claims fell to 211,000 in the week ended Dec. 10, down 20,000 from 231,000 the previous week. Jobless claims are seen as a proxy for layoffs, and last week’s level was the lowest in more than two months.

The four-week moving average of claims, which smooths out some of the weekly volatility, fell 3,000 to 227,250.

About 1.67 million people received unemployment benefits in the week ended Dec. 3, up 1,000 from the previous week.

American workers now have extraordinary job security, despite an economy that some see at risk of slipping into recession due to aggressive interest rate hikes by the Federal Reserve this year. The Fed has raised its benchmark interest rate seven times since March in an effort to slow the economy and lower prices that are driving up Americans’ wages.

The Labor Department reported that filings for jobless claims fell to 211,000 in the week ended Dec. 10, down 20,000 from 231,000 in the previous week.

The Fed raised its short-term lending rate by 0.5 percentage point on Wednesday, down from 0.75 percent in four previous hikes. Its prime rate is currently between 4.25% and 4.5%, the highest rate in 15 years.

Ironically, Fed policymakers have projected their key short-term rate to be between 5% and 5.25% by the end of 2023. This suggests that the Fed is willing to raise its rate by an additional three quarters. point and leave it for the next year.

Fed officials have said the unemployment rate needs to be at least 4% to slow inflation. Currently, the unemployment rate is 3.7%, several times higher than the lowest rate in half a century. US employers added 263,000 jobs last month. There are nearly two jobs for every unemployed American.

Some economists expect the U.S. to slip into recession next year as Fed rate hikes raise borrowing costs and slow economic activity.

The housing market was hit the hardest as mortgage rates doubled from a year ago, pushing many buyers out of the market. Sales of foreclosed homes have fallen for nine straight months.

The technology and real estate sectors have dominated the strong job market, with Facebook, Twitter, Amazon, DoorDash, BuzzFeed, Redfin and Compass all announcing significant layoffs in recent months.


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