WASHINGTON, DC – In the early days of 2024, the labor market displayed unexpected resilience, as evidenced by a surprising drop in initial jobless claims last week. According to the Labor Department’s report on Thursday, filings for unemployment insurance totaled 187,000 for the week ending Jan. 13, marking the lowest level since Sept. 24, 2022. This figure represented a decline of 16,000 from the previous week and was below the Dow Jones estimate of 208,000.
Despite the Federal Reserve’s efforts to slow the economy, particularly the job market, through interest rate hikes, labor strength persisted. Central bank policymakers attributed the supply-demand mismatch between companies and the available labor pool as a factor contributing to the highest inflation levels in over 40 years.
Accompanying the drop in weekly claims was an unexpected decrease of 26,000 in continuing claims, which ran a week behind. The total for continuing claims reached 1.806 million, below the FactSet estimate of 1.83 million.
Robert Frick, corporate economist at Navy Federal Credit Union, observed, “Employers may be adding fewer workers monthly, but they are holding onto the ones they have and paying higher wages given the competitive labor market.”
In other economic news, the Philadelphia Fed reported a manufacturing index reading of -10.6 for January, reflecting the difference between companies reporting growth and contraction. While this figure improved from the -12.8 posted in December, it fell below the Dow Jones estimate of -7.
The Philadelphia Fed gauge indicated declines in unfilled orders, delivery times, and inventories. The employment index showed some improvement but remained negative at -1.8, while measures for prices paid and received both eased from December.
A separate report indicated optimism for housing, with building permits totaling 1.495 million, a 1.9% monthly increase above the 1.48 million estimate. However, housing starts saw a 4.3% monthly decline at 1.46 million, still better than the 1.43 million estimate.
These reports followed the Federal Reserve’s Beige Book report, which noted mostly stagnant economic activity since late November. The report acknowledged signs of a “cooling labor market” with lower wage pressures and highlighted high-interest rates limiting housing activity, though there were hopes for future easing from the Fed to accelerate the pace.