The number of Americans filing for unemployment benefits dropped more than expected last week, signaling a still-resilient labor market despite slowing job opportunities.
Initial jobless claims fell by 16,000 to a seasonally adjusted 207,000 for the week ending Jan. 25, according to the Labor Department.
This was well below economists’ forecast of 220,000, reinforcing the view that layoffs remain low even as hiring slows.
However, while claims remain at levels consistent with a stable labor market, consumer confidence in job security is waning.
A recent Conference Board survey showed that the share of Americans who view jobs as “plentiful” fell to a four-month low in January, while the proportion who see jobs as “hard to get” reached its highest level since October.
US GDP growth in Q4 2024 was 2.3%
At the same time, the US economy continued to defy expectations of a sharp slowdown, expanding at an annualized 2.3% in the fourth quarter of 2024.
Consumer spending, which accounts for the largest share of economic activity, grew at a strong 4.2% pace, marking back-to-back quarters of solid gains.
A surge in motor vehicle sales led the way, offsetting drags from a Boeing strike and weaker business investment.
Yet, concerns over economic uncertainty persist as companies scale back hiring amid tight monetary policy and anticipation of policy shifts under President Donald Trump’s new administration.
Businesses are waiting to assess the impact of potential tax cuts, tariffs, and immigration policies before committing to workforce expansion.
The Federal Reserve, which left interest rates unchanged in its latest policy meeting, signaled a cautious approach toward future rate cuts.
Chair Jerome Powell noted that policymakers need to see more progress on inflation before making adjustments, emphasizing that the central bank is in no rush to shift its stance.
Meanwhile, underlying inflation rose at a 2.5% annualized rate in the fourth quarter, marking only the second quarterly acceleration since late 2022.
This reinforces the Fed’s cautious stance on easing policy too soon.
While the labor market remains resilient for now, the decline in continuing jobless claims—down 42,000 to 1.858 million—suggests hiring may be slowing.
Looking ahead, the economic outlook for 2025 points to more moderate growth, with GDP expected to cool to around 2.2%, according to Bloomberg forecasts.
Adding to the uncertainty, Trump’s administration is preparing to implement new tariffs, potentially as soon as this weekend, aimed at boosting domestic manufacturing.
While the president argues these measures will bring factory jobs back and reduce the trade deficit, history suggests otherwise—his first-term tariffs led to a decline in factory employment and industrial output.
For now, the US economy continues to outperform global peers, thanks to a strong labor market and steady consumer spending.
However, with hiring slowing and inflation still above target, all eyes remain on how the Fed and the White House navigate the road ahead.
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