Weekly jobless claims in the US declined to a two-month low; labour market steadily cooling.

The number of Americans filing new claims for unemployment benefits reached a two-month low last week, signaling ongoing strength in the labour market despite a slight easing in demand for workers. The report from the Labour Department also revealed that the number of people on unemployment rolls remained elevated towards the end of December.

Financial markets continue to anticipate potential interest rate cuts by the Federal Reserve in March. Despite a recent decline in job openings, the labor market’s resilience is expected to protect the economy from recession this year. Initial claims dropped to 202,000, the lowest since mid-October, according to the latest data.

The labor market, influenced by multiple interest rate hikes from the Federal Reserve, is gradually cooling. However, the unemployment rate remains below 4%, and the strong, employed consumer base is seen as a positive factor against recession concerns. Wall Street stocks rose, the dollar fell, and U.S. Treasury yields increased in response to the report.

LAYOFFS LOW IN DECEMBER

A distinct report from global outplacement firm Challenger, Gray & Christmas indicated a 24% decrease in job cuts announced by U.S.-based employers in December, totaling 34,817. However, planned layoffs surged by 98% to 721,677 in 2023, the highest annual count since 2020.

Financial markets are anticipating potential interest rate cuts by the Federal Reserve in March, with officials viewing the labor market as remaining tight but gradually balancing.

The labor market’s resilience is reflected in a decrease in continuing claims and an anticipated increase in nonfarm payrolls for December. Despite a potential easing in the labor market, the ADP National Employment Report suggests a robust gain of 164,000 private payrolls in December, with wage growth showing a slight slowdown. Economist Nancy Vanden Houten notes that the labor market is becoming less tight but remains stable.