• Initial claims for the week ended Oct. 3 fell by 2,000 to 197,000, below the 200,000 survey forecast.
  • Continuing claims for the week ended Sept. 26 rose by 17,000 to 1,716,000, suggesting some unemployed workers are taking longer to find jobs.
  • The prior week's initial claims were revised up to 199,000 from 197,000, highlighting the volatility of weekly data.

Mixed Signals in the Labor Market

New applications for U.S. unemployment benefits declined modestly last week, staying near historic lows and coming in below expectations, while the number of Americans continuing to collect benefits edged higher—a combination that points to limited layoffs but potentially tougher job searches.

The Labor Department reported Thursday that initial jobless claims fell by 2,000 to a seasonally adjusted 197,000 for the week ended Oct. 3. Economists surveyed had forecast 200,000. The prior week's reading was revised up to 199,000 from an initially reported 197,000.

Meanwhile, continuing claims—which track the number of people receiving benefits after an initial week of aid—increased by 17,000 to 1,716,000 in the week ended Sept. 26. The continuing claims data are reported with a one-week lag.

The mixed report offers a nuanced view of the labor market: employers are holding onto workers, but those who lose their jobs may be facing longer spells of unemployment.

Context and Implications

The latest figures come amid signs of a cooling but still resilient labor market. Recent data from Challenger, Gray & Christmas showed that planned layoffs fell 18% in September from August and were down 20% from a year ago. However, hiring intentions remained subdued, with September hiring plans down 23% year-over-year and the weakest September tally since 2011. A Conference Board survey also showed that the share of Americans describing jobs as "plentiful" fell to its lowest since February 2021, while those saying jobs were "hard to get" rose to a more than 5½-year high.

"The low level of initial claims suggests that employers are not yet resorting to widespread layoffs, but the rise in continuing claims indicates that finding a new job is becoming more challenging," said one economist, who requested anonymity to speak freely.

The claims data are closely watched by policymakers and investors for clues about the health of the labor market. The Federal Reserve, which raised its benchmark interest rate by 25 basis points in September to a range of 3.75%-4.00%, has signaled that further increases may be needed to combat inflation. While the low initial claims suggest little immediate deterioration in the labor market, the rise in continuing claims could be a sign of underlying weakness.

Market Reaction and Outlook

Financial markets showed little immediate reaction to the data, with futures on the S&P 500 pointing to a modestly higher open. Treasury yields were little changed, with the 10-year note hovering around 3.8%. The dollar was steady against a basket of currencies.

Some analysts cautioned against reading too much into one week's data, given the volatility of the series. "Weekly claims can be noisy, especially around turning points in the labor market," said a strategist at a major Wall Street bank. "We need to see a sustained increase in continuing claims before concluding that the labor market is deteriorating materially."

The Labor Department noted that the data are seasonally adjusted and subject to revision. The four-week moving average of initial claims, a less volatile measure, was 200,000 for the week ended Sept. 26, down from 234,000 a year earlier.

Looking ahead, economists will be watching next week's claims report for signs of whether the recent uptick in continuing claims is a blip or the start of a trend. The Labor Department's monthly jobs report, due early next month, will provide a more comprehensive picture of the labor market.

Correction: An earlier version of this article misstated the prior week's initial claims figure. It was revised to 199,000, not 197,000.