The number of Americans filing for unemployment benefits unexpectedly fell last week, consistent with a continued low level of layoffs during the period. However, the unemployment rate remained elevated in December amid sluggish hiring.
Initial claims for state unemployment benefits dropped for a second straight week, declining by 10,000 to a seasonally adjusted 214,000 for the week ended December 20, according to the Labor Department. That figure came in below the 232,000 new applications forecast by analysts surveyed by data firm FactSet. The weekly report was released a day early because of the Christmas holiday.
Applications for unemployment aid are widely viewed as a proxy for layoffs and are often considered a real-time indicator of the health of the job market. The government reported last week that the U.S. gained a modest 64,000 jobs in November but lost 105,000 in October, largely due to the departure of federal workers following cuts by the Trump administration.
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The unemployment rate rose to 4.6% last month, the highest level since 2021. According to the Associated Press, the elevated job losses in October were driven by a decline of 162,000 federal workers, many of whom resigned at the end of fiscal year 2025 on September 30 amid pressure from billionaire Elon Musk’s purge of U.S. government payrolls. Labor Department revisions also removed 33,000 jobs from August and September payrolls.
Christopher Rupkey, chief economist at FWDBONDS, said that unless companies actually fire workers, the economy will continue to move forward “at a moderate pace.” The labor market remains stuck in what economists and policymakers describe as a “no hire, no fire” mode, according to Reuters.
While the broader economy remains resilient — with gross domestic product expanding at its fastest pace in two years during the third quarter — the labor market has nearly stalled. Economists say President Donald Trump’s import tariffs and immigration crackdown have weighed on both labor demand and supply.
The data had little impact on U.S. financial markets during the holiday-shortened trading week.
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“Continued claims remain at a level consistent with a slow pace of hiring but aren’t sending a signal that hiring conditions have gotten worse,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics.
The Labor Department’s report also showed that the four-week moving average of claims, which smooths out week-to-week volatility, fell by 750 to 216,750. Meanwhile, the total number of Americans receiving jobless benefits for the week ending December 13 rose by 38,000 to 1.92 million, the government said.