US weekly jobless claims near 57-year lows, underscore labor market stability

Key Points:

• Initial claims for U.S. unemployment benefits fell to 194,000 last week, near a 57-year low, indicating modest job growth in October following a weak September.
• The labor market remains resilient despite the US-Israeli war with Iran and associated oil price shocks, supported by strong corporate profits, robust domestic demand, and a smaller workforce due to retirements and immigration restrictions.
• Continuing claims, a proxy for hiring, rose slightly to 1.728 million but remain low, suggesting moderate job gains; however, labor market slack and cooling wage growth persist amid tightening financial conditions.
• Economists caution that the low unemployment claims may not fully reflect labor market challenges, as long-term unemployed individuals and new entrants face difficulties finding jobs, potentially leading to a gradual rise in the unemployment rate.
• The Federal Reserve is expected to hold interest rates steady next week but may resume hikes in December to manage inflation, with the labor market conditions allowing for continued monetary tightening.