Jobless claims dropped unexpectedly in still-tight labor market

The number of Americans filing new claims for unemployment benefits fell unexpectedly by 12,000 last week, indicating the labor market remains tight even as demand for labor is cooling amid higher interest rates.

Initial claims for state unemployment benefits fell to a seasonally adjusted 214,000 for the week ended Oct. 15, the Labor Department said on Thursday. Data for the prior week was revised to show 2,000 fewer applications filed than previously reported. Economists polled by Reuters had forecast 230,000 applications for the latest week.

The labor market has been largely resilient, though some cracks are emerging as the Federal Reserve ramps up its monetary policy tightening campaign. The central bank has hiked its policy rate from near-zero at the beginning of this year to the current range of 3% to 3.25%, and officials have signaled more large increases were on the way this year with inflation showing little sign yet of a substantial retreat.

The government reported earlier this month that job openings dropped by 1.1 million, the largest decline since April 2020, to 10.1 million on the last day of August. But economists do not expect widespread layoffs, saying companies were wary of releasing their workers after difficulties hiring in the past year as the COVID-19 pandemic forced some people out of the workforce, partly due to prolonged illness caused by the virus.

The claims report showed the number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 21,000 to 1.385 million in the week ending Oct. 8.