US Jobless Claims Fall, Pointing to Continued Labor Market Strength

Workers build the 2020 Ford Explorer at Ford's Chicago Assembly Plant in Chicago, Ill., on June 24, 2019. (Kamil Krzaczynski/Reuters)

The number of initial jobless claims—a measure of Americans newly applying for unemployment benefits—fell in late January, in a sign that the robust U.S. labor market remains on solid footing.

The Labor Department said in a release (pdf) that the number of initial jobless claims dropped by 7,000 to a seasonally adjusted 216,000 for the week ended Jan. 25, while the four-week moving average of initial claims, which irons out week-to-week volatility, fell 1,750 to 214,500.

4-Week Moving Average of Initial Jobless Claims [IC4WSA]. (U.S. Employment and Training Administration / FRED)

The newly released claims numbers are advance figures and subject to revision. The current release revised upward the previous week’s initial claims level by 12,000 from 211,000 to 223,000, the Labor Department noted.

The number of continued jobless claims—a measure of Americans collecting unemployment benefits on an ongoing basis—fell during the week ended Jan. 18 by 44,000 to 1,703,000. The four-week moving average of continued claims dropped by 6,250 to 1,755,500.

4-Week Moving Average of Continued Claims (Insured Unemployment) [CC4WSA]. (Source: Source: U.S. Employment and Training Administration / FRED)

The total number of people claiming benefits in all programs for the week ending Jan. 11 was 2,171,792, a decrease of 106,447 from the previous week. There were 2,148,787 persons claiming benefits in all programs in the comparable week in 2019, which reflects a year-over-year drop of 1.06 percent.

The jobless rate is near a 50-year low of 3.5 percent, and a measure of labor market slack hit an all-time low of 6.7 percent in December.

Fed Keeps Rates on Hold, Citing Strong Labor Market

The Federal Reserve on Jan. 29 kept interest rates unchanged, noting in a statement that “the labor market remains strong and that economic activity has been rising at a moderate rate.”

“Job gains have been solid, on average, in recent months, and the unemployment rate has remained low,” the Fed’s rate-setting body stated after members voted to hold the benchmark Federal Funds rate within a target range of 1.5 to 1.75 percent.

The robust labor market is a key support to America’s longest-ever economic expansion, now in its 11th year, despite prolonged weakness in business investment.

Economic Growth in 2019

The U.S. economy maintained a steady rate of growth in the fourth quarter of 2019, with newly released Commerce Department figures showing that the year-over-year quarterly rate of expansion was 2.1 percent.

This rate of growth, which compares the fourth quarter of 2019 with the fourth quarter of 2018, remains unchanged from the previous quarter.

The Commerce Department released the gross domestic product (GDP) figures Jan. 30, noting that growth was buoyed by positive contributions from personal consumption expenditures, federal government spending, state and local government spending, residential fixed investment, and exports.

Headwinds to economic expansion include negative contributions from private inventory investment and nonresidential fixed investment, the Commerce Department said.

The GDP number is an advance estimate and is subject to revision.

Real GDP figures, showing the percent change from the preceding quarter. (BEA)

Economic growth for the full year came in at 2.3 percent for 2019, the Commerce Department figures show, which is a drop of 0.6 percent compared to the 2018 rate of economic expansion of 2.9 percent.

Factors that helped lift the GDP in 2019 include positive contributions from personal consumption expenditures, nonresidential fixed investment, federal government spending, state and local government spending, and private inventory investment.

The Commerce Department attributed headwinds to 2019 growth mostly to a slowdown in nonresidential fixed investment and personal consumption, as well as contraction in exports.