Fewer Americans filed for unemployment benefits last week, a sign that layoffs remain limited even as broader indicators suggest the labor market is losing strength. New applications for jobless benefits fell sharply in the final week of the year. For the week ending Dec. 27, initial claims dropped by 16,000 to 199,000, down from 215,000 the previous week, according to the Labor Department.
Economists surveyed by FactSet had expected about 208,000 filings. The report was released a day earlier than usual because of the New Year’s Day holiday. Holiday weeks often distort unemployment data. Shortened workweeks can delay filings, as some people who lose jobs wait until offices reopen to submit claims.
That seasonal effect makes it harder to read too much into any single week’s numbers. Even so, weekly claims are closely watched because they serve as a near real-time measure of layoffs and overall labor market health. By that standard, job cuts remain relatively low, despite other data pointing to a slowdown in hiring.
Earlier this month, government figures showed the U.S. added 64,000 jobs in November. However, those gains followed a revised loss of 105,000 jobs in October, driven largely by a steep decline in federal employment. That drop pushed the unemployment rate up to 4.6 percent, its highest level since 2021.
Many of the October losses came from federal workers who left at the end of fiscal year 2025 after staffing reductions tied to the Trump administration cutbacks. Labor Department revisions also erased 33,000 jobs from August and September payrolls.
Taken together, recent data paint a picture of a labor market that is still standing but clearly slowing. Hiring has cooled amid uncertainty around President Donald Trump’s tariff policies and the lingering impact of high interest rates imposed by the Federal Reserve in 2022 and 2023 to tame inflation.
Since March, monthly job growth has averaged just 35,000, roughly half the pace seen in the year before that. The Federal Reserve responded earlier this month by cutting its benchmark interest rate by a quarter point, marking its third consecutive reduction.
Fed Chair Jerome Powell said officials were concerned the labor market may be weaker than headline numbers suggest, noting that employment data could eventually be revised down by as much as 60,000 jobs. Meanwhile, several large companies, including UPS, General Motors, Amazon, and Verizon, have announced layoffs in recent weeks.
The Labor Department also reported that the four-week average of unemployment claims rose slightly to 218,750, while the total number of Americans continuing to receive benefits fell to 1.87 million.
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