US weekly jobless claims fall, but labor market is still in a holding pattern

WASHINGTON, Jan 15 (Reuters) – The number of Americans filing new applications for unemployment benefits unexpectedly fell last week, but the drop was likely because of ongoing challenges adjusting the data for seasonal fluctuations around this time of the year.

The labor market remains in a holding pattern, with layoffs still low and hiring sluggish. Economists say President Donald Trump’s aggressive trade and immigration policies have reduced both demand for and supply of workers. Businesses are also unsure of their staffing needs as they invest heavily in artificial intelligence, curbing 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, lead U.S. economist at Oxford Economics.

Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 198,000 for the week ended January 10, the Labor Department said on Thursday. Economists polled by Reuters had forecast 215,000 claims for the latest week.

Claims are difficult to adjust for seasonal fluctuations around the year-end holiday season and the start of the year. Unadjusted claims shot up 31,984 to 330,684 last week. Seasonal factors, the model that the government uses to iron out seasonal fluctuations from the data, had expected applications to increase by 45,652 last week.

There were notable increases in unadjusted claims in California, Massachusetts, Michigan, Texas and Tennessee. These more than offset a 4,382 decline in filings in New York.

U.S. stocks opened higher. The dollar advanced versus a basket of currencies. U.S. Treasury yields rose.

Labor market stasis was underscored by the Federal Reserve’s Beige Book report on Wednesday, which showed “employment was mostly unchanged” in early January. The U.S. central bank said multiple districts “reported an increase in the usage of temporary workers, with one contact reporting this allows them ‘to stay flexible in uncertain times’.”

When firms were hiring, it was “mostly to backfill vacancies rather than create new positions,” the Fed added.

The government reported last week that nonfarm payrolls increased by 50,000 jobs in December. The economy added 584,000 jobs in 2025, the fewest in five years, averaging about 49,000 positions per month. The unemployment rate fell to 4.4% from 4.5% in November. But long-term unemployment remains prevalent.

The number of people receiving unemployment benefits after an initial week of aid, a proxy for hiring, decreased 19,000 to a seasonally adjusted 1.884 million during the week ended January 3, the claims report showed.

The Fed is expected to keep its benchmark overnight interest rate in the 3.50%-3.75% range at its January 27-28 meeting.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)