U.S. unemployment claims unexpectedly declined in a holiday-shortened week, indicating low layoffs despite a sluggish hiring environment and an elevated jobless rate.
The number of Americans filing for unemployment benefits fell unexpectedly last week, reflecting a continued low level of layoffs during the holiday season. However, the unemployment rate remains high as hiring slows.
Initial claims for state unemployment benefits decreased for the second consecutive week, dropping by 10,000 to a seasonally adjusted total of 214,000 for the week ending December 20, according to the Labor Department. This figure was notably below the 232,000 new applications that analysts surveyed by data firm FactSet had predicted. The weekly report was released a day early due to the upcoming Christmas holiday.
Applications for unemployment aid are widely regarded as a proxy for layoffs and serve as a real-time indicator of the job market’s health. The government reported last week that the U.S. economy added a modest 64,000 jobs in November, following a loss of 105,000 jobs in October. This decline was largely attributed to the departure of federal workers due to cuts implemented by the Trump administration.
The unemployment rate rose to 4.6% in November, marking the highest level since 2021. According to the Associated Press, the significant job losses in October were primarily driven by a reduction of 162,000 federal workers, many of whom resigned at the end of fiscal year 2025 on September 30, amid pressures stemming from billionaire Elon Musk’s efforts to reduce U.S. government payrolls. Additionally, Labor Department revisions adjusted the job numbers downward, removing 33,000 jobs from August and September payrolls.
Christopher Rupkey, chief economist at FWDBONDS, noted that unless companies begin to fire workers, the economy is likely to continue progressing “at a moderate pace.” The labor market appears to be in a “no hire, no fire” mode, as described by economists and policymakers, according to Reuters.
Despite the broader economy showing resilience—with gross domestic product expanding at its fastest pace in two years during the third quarter—the labor market has nearly stalled. Economists attribute this stagnation to President Donald Trump’s import tariffs and immigration policies, which have negatively impacted both labor demand and supply.
The recent data had little effect on U.S. financial markets during the holiday-shortened trading week.
“Continued claims remain at a level consistent with a slow pace of hiring but aren’t signaling that hiring conditions have worsened,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics.
The Labor Department’s report also indicated that the four-week moving average of claims, which smooths out week-to-week fluctuations, fell by 750 to 216,750. Meanwhile, the total number of Americans receiving jobless benefits for the week ending December 13 increased by 38,000 to reach 1.92 million, according to government data.
As the holiday season progresses, the labor market’s dynamics will continue to be closely monitored, especially in light of the ongoing economic challenges.
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