(Tribune News Service) — Applications for U.S. unemployment benefits fell to the lowest level since January last week, indicating a healthy labor market that continues to support the economy.

Initial jobless claims dropped by 20,000 to 201,000 in the week ending Sept. 16, returning to within striking distance of the lowest level in more than five decades, according to Labor Department data out Thursday. The figure was below all estimates in a Bloomberg survey of economists.

Continuing claims, which are a proxy for the number of people receiving unemployment benefits, declined to 1.66 million in the week through Sept. 9. That was also the lowest level since the start of the year.

Stock futures were down, and Treasury yields moved higher.

The figures, which correspond with the reference period for the Bureau of Labor Statistics’ monthly employment report, underscore the resilience of the labor market. While the pace of hiring has slowed across the economy, firms have largely avoided cutting workers.

With layoffs limited and unemployment low, consumers have continued to spend, supporting economic growth.

“The analysis is straightforward: while the pace of new hiring has moderated significantly in recent months, layoffs are still at rock bottom levels,” said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets. “While a single week’s claims data rarely move the big picture needle, these figures are certainly indicative of a still-tight labor market.”

On Wednesday, Federal Reserve Chair Jerome Powell described the labor market as tight, though he added that supply and demand conditions are coming into better balance. The central bank decided to keep the benchmark interest rate at a 22-year high. Elevated borrowing costs are expected to continue to put pressure on hiring.

The four-week moving average of initial claims, which smooths out some of the volatility, dropped to 217,000, the lowest level since February.

On an unadjusted basis, claims were little changed. Applications fell in Indiana and California, while they increased in New York and Georgia.

What Bloomberg Economics says

“In a period characterized by labor-market uncertainty, the recent decline in jobless claims is a bright spot for policymakers hoping to engineer a soft landing for the economy. We think the decline won’t last, however, as union strikes slow the production of cars and parts, and a potential government shutdown could put federal employees and contractors out of work temporarily. With high-profile layoff announcements likely taking effect over the next several weeks, we expect jobless claims to resume rising.”

— Stuart Paul, economist

With assistance from Jordan Yadoo and Augusta Saraiva.

©2023 Bloomberg L.P.

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