By Lucia Mutikani
WASHINGTON, Nov 5 (Reuters) – The number of Americans filing new claims for unemployment benefits slipped to a 57-year low last week, pointing to labor market resilience, though uncertainty over the drawn-out conflict in the Middle East is constraining hiring.
Other data from the Labor Department on Thursday showed stronger-than-expected growth in worker productivity in the third quarter. The surge in productivity depressed labor costs for the first time in more than a year and reinforced views of policymakers and economists that the labor market was not a source of inflation.
Benign wage inflation gives the Federal Reserve more latitude to focus on rising price pressures stemming from the US-Israeli war with Iran. Anger over the conflict, now in its ninth month, cost President Donald Trump’s Republican party control of Congress, with Democrats performing strongly in this week’s midterm elections.
Initial claims for state unemployment benefits fell 6,000 to a seasonally adjusted 189,000 for the week ended October 31, the Labor Department said. Economists polled by Reuters had forecast 196,000 claims for the latest week.
Claims matched the 189,000 level touched in mid-July, which was the lowest reading since 1969. They have stayed mostly below 200,000 since mid-September. Low layoffs, thanks to strong domestic demand and profit growth, are anchoring the labor market. But some economists viewed the low level of jobless claims as a function of a smaller labor force amid an immigration crackdown, rather than fewer job cuts.
Others believed the labor market could be tightening. The government reported this week that there were 1.06 open jobs for every unemployed person in September, up from 1.02 in August.
No state reported an increase in unadjusted claims in excess of 1,000 last week. A separate report from global outplacement firm Challenger, Gray and Christmas showed US-based employers announced 43,994 job cuts in October, up 2% from September. Planned layoffs dropped 71% compared to October 2025.
Despite the rise over the month, layoffs were the lowest for any October since 2023. Employers announced plans to hire 444,692 workers last month, a 57% jump from October 2025. Hiring plans were the highest for any October since 2009, and likely mostly seasonal jobs.
“Employers are holding on to the workers they have heading into the holidays, and the hiring they are announcing is largely short-term, seasonal work,” said Andy Challenger, chief revenue officer at Challenger, Gray & Christmas. “Companies want the flexibility to meet holiday demand without adding permanent headcount.”
The reluctance to increase permanent hiring means some unemployed people are experiencing long periods of joblessness.
The claims report showed the number of people receiving unemployment benefits after an initial week of aid, a proxy for hiring, increased 23,000 to a still-low seasonally adjusted 1.718 million during the week ended October 24.
The so-called continuing claims, however, do not include some unemployed people, including recent college graduates and others who have little or no work history. Some might also have exhausted their eligibility for benefits, limited to 26 weeks in most states, keeping continuing claims at relatively low levels.
The claims report has no bearing on the government’s closely watched employment report for October due on Friday as it falls outside the survey period. Nonfarm payrolls likely increased by 65,000 jobs last month after rising 29,000 in September, a Reuters survey of economists showed. The unemployment rate is forecast unchanged at 4.2%. The Chicago Fed is projecting the jobless rate at 4.14%, which would round down to 4.1%.
US stocks were lower. The dollar was steady against a basket of currencies. US Treasury yields fell.
LABOR COSTS DECLINE
A separate report from the Labor Department’s Bureau of Labor Statistics showed nonfarm productivity, which measures hourly output per worker, increased at a 3.6% annualized rate in the third quarter after advancing by an upwardly revised 2.1% pace in the second quarter.
Economists had forecast productivity increasing at a 2.8% rate after a previously reported 1.4% growth pace in the second quarter. Productivity is volatile on a quarter-on-quarter basis. It grew at a 2.1% rate from a year ago. Economists and policymakers are hoping that an artificial intelligence spending blitz will translate into significant productivity gains.
“AI has yet to make a noticeable contribution. Productivity gains have been fairly consistent over the past several years,” said Stephen Stanley, chief US economist at Santander US Capital Markets. “What we have seen is a transformation of the economy that came out of the trauma of the pandemic. Businesses had to figure out new ways to operate during the pandemic and many of their improvisations yielded lasting efficiency improvements.”
Unit labor costs — the price of labor per single unit of output — fell at a 0.7% rate last quarter. That was the first decline since the second quarter of 2025 and followed an upwardly revised 1.9% growth pace in the second quarter. The data also showed workers’ share of economic output falling to new lows.
Economists had forecast labor costs rising at a 0.6% pace after growing at a previously reported 1.2% rate. Labor costs grew at a 2.4% rate from a year ago. They followed on the heels of data last week showing a moderate increase in the Employment Cost Index, the broadest measure of labor costs, in the third quarter. Policymakers and economists have argued that the jobs market was not a source of inflation.
The US central bank last week left its benchmark overnight interest rate in the 3.75%-4.00% range while acknowledging that inflation “remains elevated.” Economists expect the Fed to raise borrowing costs in December.
“The Fed will take some comfort from continued solid productivity gains and subdued unit labor costs, though any evidence that the job market is starting to tighten would weigh toward additional rate hikes,” said Sal Guatieri, a senior economist at BMO Capital Markets.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci )
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