Last week, there was an unexpected fall in the number of Americans filing for unemployment benefits, suggesting a tighter labor market and strengthening economy.

Initial claims for state unemployment benefits dropped 1,000 to a seasonally adjusted 230,000 for the week ending January 27, according to the Labor Department on Thursday. Data for the previous week was revised to reveal that 2,000 fewer claims were received than what was reported.

Economists had forecast claims to increase to 238,000 for this week. The Labor Department stated that last week’s claims for Maine were estimated and also that claims-taking procedures in both Puerto Rico and the Virgin Islands still have not went back to normal following Hurricanes Irma and Maria.

Last week was the 152nd week in a row that claims remained below the 300,000 threshold, which is connected to a strong labor market. This is the longest stretch seen since 1970.  The labor market is coming close to full employment, with the jobless rate at a 17-year low of 4.1 percent.

The tightening of the labor market has raised confidence among Federal Reserve officials that this year inflation will move towards the U.S. central bank’s 2 percent target.  On Wednesday, the Fed left interest rates unchanged and described the labor market as having “continued to strengthen.” U.S. financial markets are predicting a rate increase to be seen in March while the Fed has forecast three rate increases for 2018.

Last week’s four-week moving average of initial claims, though of as a better measure of labor market trends since it removes week-to-week volatility, dropped 5,000 to 234,500, its lowest level since the beginning of November.


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The claims data doesn’t have influence on January’s employment report, which is due Friday, as it falls outside the survey period. According to a survey of economists, nonfarm payrolls should have risen by 180,000 jobs in January following December’s increase of 148,000 jobs.

The claims report revealed that the number of people receiving benefits after an initial week of aid went up 13,000 reaching 1.95 million in the week ending January 20. The four-week moving average of the so-called continuing claims increased by 12,000 to 1.93 million.