Applications for U.S. unemployment insurance dropped unexpectedly last week to a five-month low, led by a sizable decline in Michigan.
Initial unemployment claims decreased by 16,000 to 193,000 in the week that ended Sept. 24, after a downward revision in the previous week, Labor Department data showed Thursday. The median estimate in a Bloomberg survey of economists called for 215,000 new applications.
In the decade that preceded the coronavirus pandemic, initial claims averaged about 306,000 and rarely dipped below 200,000. The four-week moving average, which smooths out volatility from week to week, fell for a fifth week to 207,000.
Continuing claims fell to 1.35 million in the week that ended Sept. 17, still historically low.
Jobless claims have remained historically low in recent months, too, as employers still try to fill millions of open positions while retaining existing workers. Half of Americans polled believe jobs were "plentiful" in September, according to data released Tuesday.
Still, hiring is expected to weaken as the Federal Reserve continues aggressive interest rate increases in its effort to bring inflation down from the highest level in four decades. The impact from the increases, which have already sent borrowing costs soaring for houses and cars, will likely work its way through the economy over the next few months and lead to higher unemployment.
"With labor still very hard to find, firms probably are holding on to people who under normal conditions would have been laid off," Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note. "At this point, then, the softening of the labor market, which the Fed wants, appears unlikely to come via rising layoffs."
On an unadjusted basis, initial claims decreased more than 12,000 to 156,060 last week. Michigan posted the biggest decline, with more than 5,600, reversing a large gain in the previous week that included layoffs in the manufacturing industry. New Jersey and New York also reported drops in claims.