US jobless claims fall to 198,000 in early January as layoffs stay low

Initial claims for unemployment benefits in the United States fell more than expected in early January, offering fresh evidence that companies are continuing to retain workers even as signs of cooling emerge in the broader labour market.

Data released on Thursday showed there were 198,000 initial claims in the week ending January 10, down 9,000 from the previous week.

Economists polled by Reuters had forecast 215,000 claims, making the latest reading a notable surprise.

The decline suggests layoffs remain historically low, reinforcing the view that employers are reluctant to shed staff after years of difficulty hiring and retaining workers.

Seasonal factors muddy the picture

Economists cautioned that the sharp drop in claims may partly reflect difficulties in adjusting the data for seasonal fluctuations around the year-end holiday period and the start of the new year.

They noted that there has been little underlying change in labour market dynamics in recent months.

While layoffs remain limited, hiring has slowed considerably.

Companies are reassessing staffing needs amid a more uncertain economic outlook and rapid investment in artificial intelligence, which is increasingly seen as a factor curbing job creation.

Policy uncertainty also weighs on labour demand.

Economists say President Donald Trump’s aggressive trade and immigration policies have reduced both the demand for workers and the supply of labour, adding to employers’ caution.

Fed sees stable employment, more temporary work.

The Federal Reserve’s Beige Book report released on Wednesday painted a similar picture, describing employment as “mostly unchanged” in early January.

The central bank said several districts reported increased use of temporary workers, allowing firms to remain flexible in uncertain times.

When companies were hiring, the Fed said it was largely to backfill existing vacancies rather than create new positions, underscoring the lack of momentum in job growth.

Government data last week showed nonfarm payrolls rose by just 50,000 jobs in December.

The economy added 584,000 jobs in 2025, the fewest in five years, averaging roughly 49,000 jobs per month.

The unemployment rate edged down to 4.4% from 4.5% in November, though long-term unemployment remains elevated.

Continued claims edge lower

The number of people receiving unemployment benefits after an initial week of aid fell by 19,000 to a seasonally adjusted 1.884 million in the week ending January 3, a measure often viewed as a proxy for hiring.

The insured unemployment rate was unchanged at 1.2%.

Claims filed by former federal civilian employees rose to 12,803, while newly discharged veterans claiming benefits increased to 4,439.

Unemployment rates were highest in states including New Jersey, Rhode Island and Washington.