New claims for unemployment benefits unexpectedly plunged to 204,000 for the week ended December, the lowest level in three and a half months, data from the Department of Labor showed Thursday.
Economists had expected jobless claims to hold steady at 225,000 after the preliminary report for the prior week showed 223,000 new applications. The prior week was revised up slightly to 225,000.
The decline of 19,000, which put the new claims number below all estimates by forecasters surveyed by Econoday, is the latest piece of labor market data indicating that the Fed’s efforts to soften demand for workers have not made much progress. In fact, several indicators suggest the labor market is getting even tighter.
The number of people filing claims for unemployment benefits after their initial week also fell, dropping by 24,000 to 1.69 million. This suggests that even those who are being laid off are finding new positions more quickly, another indicator of high demand from employers.
The holiday season can make jobless claims particularly volatile. Since Thanksgiving new claims have swung from a low of 204,000 to a high of 241,000. Even at the high end, however, jobless claims have not risen to a level consistent with a significant easing of demand for labor.
Although headlines in financial media continue to describe the labor market as “strong” or “resilient,” the Federal Reserve prefers to consider it “unbalanced.” There is just too much demand for labor in comparison to the supply of people looking for work, in the view of the Federal Reserve. The central bank sees this fueling wage growth that, given low levels of productivity growth, is not consistent with inflation coming down to its target.
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