The number of Americans filing new claims for unemployment benefits rose only slightly last week, indicating underlying strength in the economy over the course of the year.
Initial claims for unemployment benefits rose by 2,000 to a seasonally adjusted 205,000 in the week ended Dec. 16, the Labor Department said on Thursday.
Although claims figures around this time of year are volatile due to the holidays, they remain consistent with a fairly healthy labor market that is expected to keep the economy out of recession next year. A Conference Board survey on Wednesday showed that the share of consumers who say they have enough work was the highest in five months in December.
The claims data covered a week in which the government surveyed businesses for the nonfarm payrolls portion of the December jobs report. Claims fell slightly between November and the December survey period.
The economy added 199,000 jobs in November, below the monthly average of 240,000 over the past year, but more than the 150,000 jobs created in October.
Last week, the Federal Reserve maintained interest rates and indicated in updated economic forecasts that the extensive tightening of monetary policy observed over the past two years has concluded. They anticipate reduced borrowing costs in 2024. From March 2022, the US Federal Reserve raised its key interest rate by 525 basis points to the current range of 5.25% to 5.50%.
Next week’s data on the number of people taking benefits after the first week of support, a proxy for hiring, could shed more light on the fortunes of the labor market in December. So-called continuing claims fell by 1,000 to 1.865 million in the week ended Dec. 9, the claims report showed.
Continuing claims have mostly increased since mid-September, largely blamed on difficulties adjusting the data for seasonal fluctuations following an unprecedented surge in benefit claims at the start of the COVID-19 pandemic.
Economists expect the distortion to be evened out when the government revises the data next year. The strength of the labor market supports consumer spending and keeps the overall economy afloat. In another report released on Thursday, the government verified that economic growth surged in the third quarter.
Gross domestic product grew at an annualized rate of 4.9% last quarter, revised downward from a previously reported 5.2%, the Commerce Department’s Bureau of Economic Analysis (BEA) said in its third-quarter GDP estimate.
It marked the quickest growth rate since the fourth quarter of 2021. Economists had expected GDP growth to remain unchanged at a 5.2% pace.
The economy, which grew at a 2.1% pace in the second quarter, grew at a pace well above what Fed officials consider a non-inflationary growth rate of around 1.8%. However, momentum appears to have waned in the final three months of the year as consumer spending took a breather.
Growth is also expected to be hampered by a wider trade deficit and a slower pace of inventory building compared to the third quarter.
But the pace of growth is likely to remain strong enough to fend off a recession, with retail sales unexpectedly rising in November and single-family home starts and building permits rising to 1-1/2-year highs. Growth estimates for the fourth quarter range from a pace of 1.1% to 2.7%.