U.S. Jobless Claims Signal Labor Market Rebound as Fed Set to Hold Rates at January FOMC

The U.S. initial jobless claims have come in lower than expectations, signaling a rebound in the job market after last year’s weak figures. This comes amid expectations that the Fed will hold rates steady at the January FOMC meeting.

U.S. Initial Jobless Claims Come In Below Expectations

Department of Labor data show that the adjusted initial claims for the week ending December 10 were 198,000, a decrease of 9,000 from the previous week’s revised level. The data also came in below expectations of 215,000, signaling a rebound in the labor market, with holiday-season volatility well over. This figure also marks the lowest level since November.

As CoinGape reported, the jobless claims for the week ending January 3 came in below expectations, at 208,000. The Department of Labor revised this figure to 207,00, further supporting the case of a rebound in the labor market.

This development comes as the Fed is likely to hold rates steady at the January FOMC meeting after making three rate cuts last year as insurance against further weakness in the labor market. CME FedWatch data shows there is currently a 95% chance the Fed leaves rates unchanged. Meanwhile, there is only a 5% chance they lower rates by 25 basis points (bps).

Notably, the PPI inflation data, which dropped yesterday, also strengthened the case for the Fed to hold rates steady, just like the initial jobless claims. The inflation data came in at 3%, suggesting that inflation in the country may be trending higher. Some Fed officials have continued to raise concerns that inflation remains above their 2% target and could rise further due to the Trump tariffs.

Fed’s Goolsbee Comments On The Economy

In a CNBC interview, Chicago Fed President Austan Goolsbee said he is not surprised by the low jobless claims figures. He further remarked that the Fed’s most important task is to bring inflation back to the 2% target.

The Fed president also mentioned that interest rates can still go down a fair amount, but that they need firm evidence that inflation is trending downwards. Goolsbee also expects to see Fed rate cuts this year, but needs data to affirm the outlook.

Meanwhile, he also touched on the Powell probe, noting that infringing on central bank independence leads to high inflation. U.S. President Donald Trump has continued to pressure the Fed to make larger cuts, aiming to bring interest rates down to at least 1%.