The number of Americans filing new applications for unemployment benefits unexpectedly fell last week, though economists warned the decline was likely distorted by seasonal adjustment issues common at the start of the year.
Initial claims dropped by 9,000 to a seasonally adjusted 198,000 for the week ended January 10, according to the Labor Department. Economists surveyed by Reuters had expected 215,000 claims.
Unadjusted claims, however, jumped by more than 31,000, underscoring the difficulty of smoothing data around the holiday period. Economists noted that claims typically bottom out in January before rising later in the year.
The broader labor market remains in what policymakers describe as a “low-hire, low-fire” environment. Businesses are hesitant to add staff amid uncertainty linked to trade and immigration policies, while increased investment in artificial intelligence is also limiting hiring.
The Federal Reserve’s Beige Book released this week showed employment levels were largely unchanged in early January, with hiring mainly focused on replacing departing workers rather than creating new positions.
Nonfarm payrolls rose by just 50,000 jobs in December, capping the weakest year for job growth since 2020. The economy added 584,000 jobs in 2025, averaging about 49,000 per month. The unemployment rate fell slightly to 4.4%, though long-term unemployment remains elevated.
Economists expect the Federal Reserve to keep interest rates unchanged at its late-January meeting, with the first rate cut now seen as unlikely before midyear, provided inflation continues to ease.
