Jobless Claims Matched a 57-Year Low as Productivity Jumped and Labor Costs Fell

New claims for unemployment benefits fell to 189,000 last week, matching the lowest level since 1969, as employers held on to their workers.

Initial claims fell 6,000 in the week ended October 31, the Labor Department said on Thursday. Economists polled by Reuters had expected 196,000 claims, so the print came in lower than forecast.

The previous week's level was revised up to 195,000, from 194,000. The four-week moving average, which smooths weekly swings, dipped 2,250 to 194,750.

Claims have stayed mostly below 200,000 since mid-September. The last time they were this low was the week ended July 18, and Reuters identifies that reading as the lowest since 1969.

Low layoffs are not the same as strong hiring

Continuing claims tell the other half of the story. The number of people still receiving benefits after a first week of aid rose 23,000 to 1.718 million in the week ended October 24.

That series runs a week behind the headline figure and works as a proxy for hiring. Its four-week average also edged up, by 1,000 to 1,709,500, and the insured unemployment rate held at 1.1%.

Employers announced 43,994 job cuts in October, the outplacement firm Challenger, Gray & Christmas reported. That was 2% more than in September, but 71% fewer than a year earlier, and the lowest for any October since 2023.

Announced hiring plans jumped 57% from a year earlier to 444,692, the highest for any October since 2009. Reuters reported that those plans were 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, the firm's chief revenue officer.

Some economists told Reuters the low claims level may reflect a smaller labor force amid an immigration crackdown, rather than fewer job cuts. Others pointed to tightening: there were 1.06 open jobs for every unemployed person in September, up from 1.02 in August.

More output from nearly the same hours

Nonfarm productivity, which measures hourly output per worker, increased at a 3.6% annualized rate in the third quarter. Economists polled by Reuters had forecast a 2.8% increase.

Output increased 3.7% while hours worked increased just 0.1%, the Bureau of Labor Statistics said. Productivity was also up 2.1% from a year earlier.

The second quarter looked stronger on revision, too. Its productivity gain was raised to 2.1%, from the 1.4% first reported - a separate figure from the year-on-year change above.

Economists and policymakers hope an artificial-intelligence spending blitz will lift productivity further, Reuters reported. Stephen Stanley of Santander US Capital Markets was cautious: "AI has yet to make a noticeable contribution. Productivity gains have been fairly consistent over the past several years."

Labor costs fell for the first time in over a year

Unit labor costs, the price of labor per unit of output, fell at a 0.7% rate in the third quarter. That was the first decline since the second quarter of 2025, and it followed a revised 1.9% increase in the second quarter.

Hourly compensation rose 2.9%, but output per hour rose faster, so the cost of labor in each unit of output fell. Economists polled by Reuters had forecast a 0.6% increase in unit labor costs.

Costs are not falling over the year: unit labor costs were up 2.4% from a year earlier. The reading followed a moderate increase in the Employment Cost Index, the broadest measure of labor costs, in the third quarter.

One longer-running line moved to a record. Workers' share of output fell to 53.0% in the third quarter, which the bureau said was the lowest level in a series that begins in the first quarter of 1947.

Room for the Fed, with a catch

The Federal Reserve left its benchmark overnight interest rate in the 3.75%-4.00% range last week, while acknowledging that inflation "remains elevated." Economists expect the Fed to raise borrowing costs in December, according to Reuters.

"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.

What remains unknown

Whether hiring itself is reviving. Layoffs are scarce and job openings per unemployed person rose in September, but continuing claims edged up and much of the announced hiring is seasonal.

Whether low claims mean a tight market or a smaller one. The immigration-crackdown explanation and the tightening explanation point to different policy conclusions, and Thursday's data do not settle between them.

Whether the productivity pace holds. The third-quarter figures are preliminary, productivity is volatile from quarter to quarter, and the bureau revises them on December 8.

What to watch next

Watch the October jobs report on Friday. Claims for the week ended October 31 fall outside its survey period, so they say nothing about the print; a Reuters survey expects payrolls up 65,000 after September's 29,000 gain, with unemployment unchanged at 4.2%.

Watch the Federal Reserve's December meeting, where the tension in Thursday's data - subdued labor costs against a possibly tightening job market - is the argument.

Watch the revised productivity figures on December 8, the first check on whether the third quarter's pace was real.