US jobless claims plunge, signal labour market stabilising

The US labour market appears to be finding its footing with initial jobless claims tumbling to 206,000 last week—the lowest level of the year—shattering economist expectations and signalling that the cooling trend seen throughout 2025 may finally be thawing.

Initial jobless claims dropped to 206,000 in the week ended February 14, the lowest level recorded so far this year, according to data released on Thursday by the US Department of Labor.

The figure marked a decline of 23,000 from the prior week and came in well below economists’ expectations.

Economists surveyed by The Wall Street Journal had forecast claims would fall to 223,000, while analysts polled by FactSet expected 225,000.

Claims in the previous week were revised higher to 229,000.

The larger-than-expected drop suggests layoffs remain limited, even as businesses contend with higher borrowing costs, trade uncertainty, and rapid technological change.

Yields edge higher; Fed seen unlikely to cut rate at next meeting

Financial markets responded by pushing Treasury yields modestly higher, reflecting expectations that the labor market remains firm enough for the Federal Reserve to keep interest rates unchanged in the near term.

The 10-year Treasury yield rose to around 4.10%, up from 4.08% a day earlier, while the two-year yield climbed to roughly 3.48%.

Investors also digested data showing the US trade deficit widened sharply in December, adding to broader macroeconomic signals.

Taken together, the labor and trade data reinforced the prevailing market view that the Federal Reserve is unlikely to cut rates at its next policy meeting.

Fed sees stabilisation of labour market, but risks linger

Minutes from the Fed’s January policy meeting, released on Wednesday, showed that most policymakers judged labour market conditions to be showing signs of stabilisation.

However, they also flagged ongoing downside risks.

Some officials warned that a further decline in labor demand could push the unemployment rate higher in an environment where hiring remains subdued.

Others pointed to the concentration of job gains in less cyclical sectors as a potential sign of underlying vulnerability.

The claims data covered the same week in which the government surveyed employers for February’s nonfarm payrolls report.

Job growth accelerated in January, but nearly all gains came from healthcare and social assistance, highlighting the uneven nature of hiring.

Hiring remains a weak spot

While fewer workers are losing jobs, those who do appear to be struggling to find new ones.

Continuing claims, which track the number of people receiving benefits after an initial week, rose by 17,000 to 1.87 million in the week ended February 7.

That increase suggests hiring remains sluggish, a view echoed by economists who note that immigration policies, uncertainty around import tariffs and caution over artificial intelligence investments are weighing on employers’ hiring plans.

The median duration of unemployment is hovering near four-year highs, and recent college graduates have been particularly affected.

Many lack sufficient work history to qualify for unemployment benefits, meaning their difficulties are not fully captured in the claims data.

For now, the sharp fall in initial claims points to a labor market that is holding steady, even as signs of strain persist beneath the surface.