Fewer Americans applied for unemployment benefits last week, highlighting the strength of job security as 2026 begins.
The Department of Labor said Thursday that 198,000 Americans filed first-time claims for state jobless benefits, a historically low figure. Claims have only come in this low in six weeks since the pandemic struck in 2020.
In data going back to 1967, jobless claims have only been this low or lower around 2.5 percent of the time.
Economists had expected 212,000 initial claims. The prior week’s figure was revised down from 208,000 to 207,000.
Jobless claims can be volatile week-to-week so many economists look to the four-week moving average of claims. This measure fell to 205,000 from 211,500.
Jobless claims are a proxy for layoffs. The extremely low number of claims at the start of the year indicates that while employers may not be adding many workers, they are hanging on to those they have. Improving productivity figures suggest that businesses are getting more out of their current workforce, enabling them to grow without adding to headcount.
This appears to be a shift in business strategy from the low-wage, high-payroll growth approach that dominated during the Biden administration, as the policy of granting work permits to illegal immigrants added millions of new workers. President Trump’s restrictive immigration policies have slowed the growth of the workforce. As a result, businesses have shifted to investment and innovation.
Workers are benefiting from the innovation and investment strategy through two channels. Job security has increased and wages are growing at a healthy rate. Importantly, wage gains have continued to exceed inflation, giving households more purchasing power and easing affordability challenges.
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