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Something weird is happening in the labor market: employers are pulling back on hiring, unemployment has been rising, yet new jobless claims are on a downward trend.

Last week, 218,000 people filed new unemployment claims, down from 222,000 the week before, the Department of Labor said Thursday. That was the lowest level since May and fewer than the 223,000 claims forecasters had expected, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal.

Claims have stayed low and even declined as other labor market indicators have weakened. The unemployment rate has risen to levels not seen since 2021, and employers have reduced job openings to below pre-pandemic levels.

Assessing the strength of the job market has taken on new importance in recent months as officials at the Federal Reserve move to cut interest rates to boost the economy and prevent a severe spike in unemployment.

Federal Reserve is Focusing on Jobs

Signs of rising unemployment could pressure the Fed to cut its influential rate faster and further in the coming months, lowering borrowing costs to encourage spending. But such signs are nowhere to be found looking at unemployment claims, which have stayed at low levels by historical standards.

High interest rates on all kinds of loans—the result of the Fed’s campaign of anti-inflation rate hikes since 2022—have indeed put employers under financial pressure, so it’s up for debate why a long-predicted wave of layoffs has yet to materialize.

So Why Are Jobless Claims Staying Low?

Economists proposed several explanations for why jobless claims are staying low.

Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, said technical factors related to the way the bureau adjusts for seasonal layoff patterns were keeping claims artificially low. On top of that, a mild hurricane season has resulted in fewer weather-related layoffs than usual.

Another possible explanation is that employers are weathering the storm and holding on to their workers so they won’t be caught short-staffed when interest rates fall and business picks up again.