By Lucia Mutikani
WASHINGTON (Reuters) -The number of Americans filing new applications for unemployment benefits dropped to an eight-month low last week, pointing to low layoffs at the end of 2024 and consistent with a healthy labor market.
The report from the Labor Department on Thursday added to a recent raft of upbeat economic data, including consumer spending, in reinforcing the Federal Reserve's projections for fewer interest rate cuts this year. Labor market resilience is keeping the economic expansion on track.
"A stable job market will squelch the Fed's appetite for cutting rates aggressively amid nagging services inflation," said Jeffrey Roach, chief economist at LPL Financial.
Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 211,000 for the week ended Dec. 28, the lowest level since April. Economists polled by Reuters had forecast 222,000 claims for the latest week.
There were sharp declines in unadjusted claims in California and Texas. Large increases in filings were recorded in Michigan, New Jersey, Pennsylvania, Ohio, Massachusetts and Connecticut.
Claims tend to be volatile around the end of the year. Through the volatility, however, they have remained compatible with a labor market that is steadily slowing at a pace that does not signal a deterioration in economic conditions.
The four-week moving average of claims, which strips out seasonal fluctuations from the data, fell 3,500 to 223,250.
The dollar rose to a two-year high against a basket of currencies, while stocks on Wall Street were slightly stronger. Yields on longer-dated U.S. Treasuries edged higher.
CONSTRUCTION SPENDING UNCHANGED
The U.S. central bank last month delivered a third consecutive interest rate cut, lowering its benchmark overnight interest rate by 25 basis points to the 4.25%-4.50% range.
It, however, projected only two reductions in borrowing costs this year compared to the four it had forecast in September, acknowledging the resilience of the jobs market and economy. The Fed's policy rate was hiked by 5.25 percentage points in 2022 and 2023 to quell inflation.
The labor market is being underpinned by very low levels of layoffs, but employers are hesitant to add more workers after a hiring spree during the recovery from the COVID-19 pandemic.
As a result, some workers who have lost their jobs are experiencing long bouts of joblessness, with the median duration of unemployment approaching a three-year high in November.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, decreased 52,000 to a seasonally adjusted 1.844 million during the week ending Dec. 21, the claims report showed.