Fewer Americans file for jobless benefits as labor market signals cool

Fewer Americans filed for unemployment benefits last week, with initial claims dropping to the lowest level in two months. For the week ending Sept. 20, initial jobless claims fell by 14,000 to 218,000, the Labor Department said Thursday. Analysts surveyed by FactSet had expected 235,000 new applications. The four-week moving average dipped to 237,500, reflecting ongoing but moderating layoffs in a labor market that has remained historically tight by many measures.

The drop in claims comes as recent data have raised concerns about the health of the labor market, even as layoffs remain historically low. The report came as the Federal Reserve cut its benchmark rate by a quarter percentage point last week, signaling policymakers are weighing the pace of hiring against inflation pressures. Inflation remains above the Fed’s 2 percent target, complicating decisions about further rate moves as policymakers seek to sustain growth and job creation without reigniting price pressures.

Separately, the Bureau of Labor Statistics issued a sizable preliminary revision of job gains for the 12 months through March 2025, showing employers added 911,000 fewer jobs than originally reported. The BLS notes that revisions are issued annually, with final revisions due in February 2026. The revision comes amid other soft signals in recent months, including an August payroll report that showed only 22,000 jobs added, far below economists’ expectations for about 80,000.

July’s labor market picture also underscored signs of cooling. Employers advertised 7.2 million job openings at the end of July, the first time since April 2021 that there were more unemployed people than openings. The July employment report showed payroll gains of 73,000 and included sizable downward revisions for June and May, reinforcing concerns that hiring momentum has moderated even as the jobless rate remains historically low.

Looking across the data, the four-week moving average of initial claims remains a useful gauge of layoffs in a patchwork economy that has shown strength in some sectors while softening in others. Even as claims pull back from recent highs, the broader trend suggests that employment growth has cooled since earlier in the year. Analysts say the incoming data will be crucial for the Federal Reserve as it calibrates the pace and timing of any future policy moves, weighing the risk of persistent inflation against the goal of sustaining job gains.

In the near term, officials and economists will watch for signs that hiring can stabilize or pick up again without letting inflation reaccelerate. The current mix of softer payrolls and still-elevated price pressures highlights the challenge of balancing growth and price stability as the economy transitions in the post-pandemic era.