The number of Americans filing first-time unemployment benefits unexpectedly dropped to a five-month low last week, a sign the labor market remains extremely tight despite the Federal Reserve's efforts to cool it down.
Figures released Thursday by the Labor Department show applications for the week ended Sept. 24 fell to 193,000 from the downwardly revised 209,000 recorded a week earlier. That is also below the 2019 pre-pandemic average of 218,000 claims.
Thursday's data marked the lowest level in applications for unemployment insurance since April and is the first time since early May that claims dropped below 200,000.
Continuing claims, or the number of Americans who are consecutively receiving unemployment aid, fell to 1.347 million, down by 29,000 from the previous week's revised level. One year ago, nearly 5.07 million Americans were receiving unemployment benefits.
"Jobless claims came in at the lowest level since April — a sign that next week’s jobs report may indicate the labor market remains resilient," said Mike Loewengart, the head of model portfolio construction at Morgan Stanley Global Investment Office.
He added: "If that proves to be the case, it will only add fuel to the Fed’s rate hike fire, as inflation has yet to subside. So doves will likely be disappointed not to see cracks in the labor market that could cause the Fed to slow down."
The strong jobs data comes as the Federal Reserve tries to crush runaway inflation with the most aggressive rate hikes in decades. Policymakers have already approved five straight rate increases and have signaled that more hikes are to come as they try to cool the economy, and the labor market.
Updated projections released last week show that Fed officials expect unemployment to climb to 4.4% by the end of next year, up from the current rate of 3.7%. That is significantly higher than June when policymakers saw the jobless rate inching up to 3.7%. Chair Jerome Powell conceded during the post-meeting press conference that higher rates could "give rise to increases in unemployment."
"We think we need to have softer labor market conditions," Powell said. "And if we want to set ourselves up really light the way to another period of a very strong labor market, we have got to get inflation behind us. I wish there were a painless way to do that. There isn't."