Despite escalating interest rates, the recent substantial drop in the number of Americans seeking unemployment benefits signifies the robust nature of the US job market.
According to the latest report by the Labor Department, jobless claims decreased by 24,000 to 209,000 last week. This decline follows the previous week's total of 233,000, which stood as the highest count since August. The four-week moving average, a measure that evens out weekly fluctuations, reduced by 750 to 220,000.
These applications are commonly interpreted as an indicator of layoffs. The figures, consistently low by historical standards, suggest an extraordinary level of job security among most Americans.
As of the week ending on November 11, a total of 1.84 million Americans were receiving unemployment benefits, reflecting a drop of 22,000 from the preceding week.
Despite the Federal Reserve's 11 interest rate hikes since March 2022 aimed at curbing inflation, the job market and economic growth have shown surprising resilience, defying predictions of a recession this year.
However, the pace of hiring has slowed from the accelerated rates seen in 2021 and 2022. While job additions have maintained an average of 239,000 per month in 2023, it has dipped below 200,000 in three of the last five months. Simultaneously, job openings posted by employers have also declined.
Chief US economist at High Frequency Economics, Rubeela Farooqi, noted, "But job growth remains strong, the unemployment rate remains historically low, and businesses have yet to start reducing their workforce in a significant way."
Concurrently, inflation rates have considerably decelerated, dropping from 9.1% year-over-year in June 2022 to 3.2% last month, although remaining above the Fed's 2% target.
The combination of a steady albeit slightly slowing job market and decreasing inflation rates has raised optimism that the Fed can navigate a controlled economic slowdown, curbing inflation without plunging the US into a recession. Photo by Phil Whitehouse, Wikimedia commons.