U.S. Jobless Claims Rise Slightly, Fed Rate Cuts Unlikely

What Happened

The number of Americans filing new unemployment claims increased slightly last week, indicating continued strength in the labor market and reducing the likelihood of a Federal Reserve interest rate cut next week.

Key Data Points

• Initial Jobless Claims: Increased by 6,000 to 223,000 for the week ending Jan. 18.
• Economist Forecast: Expected 220,000 claims.
• Continuing Claims: Rose by 46,000 to 1.899 million, the highest level since November 2021.

Market Reaction

Stocks on Wall Street were mixed, the U.S. dollar edged higher, and Treasury yields rose as investors adjusted expectations for Fed policy.

Economic Outlook

Economists say layoffs remain low, but hiring has slowed, making it harder for job seekers to find new employment. Analysts also warn that President Donald Trump’s policies on immigration and tariffs could have inflationary effects and impact future labor market conditions.

Fed Policy Implications

The Federal Reserve is expected to hold interest rates steady at its next meeting, citing a strong labor market and concerns about inflation. The central bank has already reduced rates by 100 basis points since September but is cautious about further cuts.