Weekly U.S. unemployment claims are falling, but the labor market is still in a holding pattern

The number of Americans filing new claims for unemployment benefits fell unexpectedly last week, but the decline was likely due to ongoing problems adjusting the data for seasonal fluctuations around this time of year. The labor market remains in a holding pattern, with still few layoffs and slow hiring. Economists say President Donald Trump’s aggressive trade and immigration policies have reduced both the demand and supply of workers. Companies are also uncertain about their staffing needs as they invest heavily in artificial intelligence, which is pushing back hiring. “The picture of the labor market from the claims data, as noisy as it has been in recent weeks, is one of at least stable labor market conditions,” said Nancy Vanden Houten, chief U.S. economist at Oxford Economics.

Initial claims for unemployment benefits fell by 9,000 to a seasonally adjusted 198,000 for the week ending Jan. 10, the Labor Department said Thursday. Economists polled by Reuters had forecast 215,000 claims for the past week.

Claims are difficult to adjust to seasonal fluctuations around the end-of-year holidays and the beginning of the year. Unadjusted claims increased by 31,984 to ‍330,684 last week. Seasonal Factors, the model the government uses to smooth out seasonal fluctuations from the data, had expected applications to increase by 45,652 last week.

There was a notable increase in unadjusted claims in California, Massachusetts, Michigan, Texas and Tennessee. These more than offset a decline of 4,382 applications in New York.

US stocks opened higher. The dollar advanced against a basket of currencies. Yields on US government bonds rose.

The labor market stagnation was underscored Wednesday by the Federal Reserve’s Beige Book report, which showed employment largely unchanged in early January. The U.S. central bank said several districts “reported an increase in the use of temporary workers, with one contact reporting that this allows them to ‘remain flexible in uncertain times’.” When companies hired, “it was primarily to fill vacancies and not to create new positions,” the Fed added. The government reported last week that nonfarm payrolls rose by 50,000 jobs in December. The economy added 584,000 jobs in 2025, the fewest in five years, with an average of about 49,000 jobs per month. The unemployment rate fell to 4.4% from 4.5% in November. But long-term unemployment remains widespread.

The number of people receiving unemployment benefits after an initial week of relief, a measure of hiring, fell by 19,000 to a seasonally adjusted 1.884 million in the week ended Jan. 3, the claims report showed. The Fed is expected to keep its key overnight rate between 3.50% and 3.75% at its Jan. 27-28 meeting.