U.S. jobless claims fell sharply last week, underscoring resilience in the labor market even as hiring remains sluggish and the Federal Reserve moves cautiously on rate cuts. Initial claims for unemployment benefits dropped to a seasonally adjusted 218,000 for the week ended Sept. 20, down 14,000 from the prior week and well below economists' expectations for 235,000, the Labor Department said Thursday.
Continuing claims, a measure of those remaining on unemployment rolls, edged down by 2,000 to 1.926 million, suggesting laid-off workers are still finding jobs despite slower overall hiring. The report comes just a week after the Fed cut its benchmark interest rate by a quarter percentage point to a range of 4% to 4.25%, its first easing move of 2025.
Fed policymakers had cited "downside risks to employment" when they lowered rates, pointing to weak job creation and a multi-year low in job openings. Nonfarm payroll growth has averaged just 29,000 per month over the past three months, compared with 82,000 during the same period a year earlier.
Still, the claims data suggest employers are holding onto workers. The economy "is showing resilience in the midst of substantial changes in trade and immigration policies, as well as in fiscal, regulatory and geopolitical arenas," Fed Chair Jerome Powell said Tuesday. Powell noted that policy remains "modestly restrictive," leaving the door open for additional cuts.
Broader economic data also pointed to strength. The Commerce Department said gross domestic product rose at an annualized rate of 3.8% in the second quarter, revised upward by half a percentage point from previous estimates. The improvement was driven largely by a 2.5% increase in personal consumption expenditures, which account for roughly two-thirds of the economy.
Business investment also showed signs of life, with durable goods orders rising 2.9% in August, far surpassing expectations for a 0.4% decline. Excluding transportation, orders rose 0.4% and were up 1.9% when defense spending was stripped out.
Housing, which had been a weak spot, is rebounding. New home sales surged 20.5% in August, the largest monthly gain since January 2022, offering a potential boost to construction employment.
