By Lucie Mutikani
WASHINGTON, Nov 12 (Reuters) – The number of Americans filing new claims for unemployment benefits rose more than expected last week but remained at a level consistent with a stable job market, allowing the Federal Reserve to focus on fighting inflation.
Economists expect layoffs to remain low through the end of the year, although seasonal volatility linked to the holiday season could cause spikes in claims data. The government last week reported an increase in nonfarm payrolls in October and a drop in the unemployment rate to 4.1% from 4.2% in September. Labor market resilience persists despite ongoing conflict in the Middle East, “which is driving inflation.”
“Businesses continue to retain their workforce,” said Olivia Cross, senior U.S. economist at Pantheon Macronomics. “We expect layoffs to remain low through the fourth quarter, but then face some pressure next year in response to recent tightening financial conditions and companies’ growing use of AI.”
Initial claims for state unemployment benefits increased by 9,000 to 200,000 on a seasonally adjusted basis for the week ended Nov. 7, the Labor Department said Thursday. Economists polled by Reuters had forecast 195,000 claims for last week.
Registration applications have remained at or below 200,000 since mid-September and remain close to the level of 189,000 reached in mid-July, the lowest since 1969, suggesting a tightening of the labor market. But because wages are growing at a moderate rate, most economists don’t believe that’s the case.
Some say the shrinking workforce, due to retirements and the Trump administration’s crackdown on immigration, is the main cause of historically low claims.
“A generally smaller labor force could mean fewer workers likely to apply for unemployment insurance,” said Veronica Clark, an economist at Citigroup. Of course, this would “still be consistent with a low unemployment rate, with continued claims suggesting the unemployment rate could even fall further towards around 4.0% based on the data by early 2027.”
The claims report showed that the number of people receiving unemployment benefits after an initial week of aid, an indicator of hiring, fell by 20,000 to a seasonally adjusted 1.697 million in the week ended Oct. 31. But so-called continuing claims do not include some unemployed workers, such as recent college graduates and others who have little or no work history.
Some people may also have exhausted their eligibility for benefits, limited to 26 weeks in most states, keeping continued claims at relatively low levels. The median duration of unemployment increased from 11.5 weeks in September to 11.9 weeks in October, the longest since November 2021.
Even as companies stockpile workers, they remain reluctant to increase their workforce, with economists citing uncertainty from the U.S.-Israeli war with Iran, now in its ninth month. Companies were also unsure of their staffing needs when they adopted AI.
US central bank Governor Michael Barr warned on Thursday that the country must prepare for “severe near-term disruptions” to the labor market due to AI, which he warned, depending on how quickly it is deployed, could begin to displace workers on a large scale and widen inequality in favor of investors.
Stocks on Wall Street were lower as the departure of Nvidia CEO Jensen Huang and rising oil prices following President Donald Trump’s comments that the United States did not need a deal with Iran weighed on sentiment. The dollar rose against a basket of currencies. U.S. Treasury yields rose.
PROPERTY PRICES STILL HIGH
Government data this week showed that consumer prices rose faster than expected in October. This, combined with comments from Fed Governor Christopher Waller, prompted financial markets to almost fully price in a 25 basis point rate hike in December and anticipate another hike in January.
The Fed left its benchmark overnight interest rate in the 3.75% to 4.00% range last month. While the job market continues to hold up, rising mortgage rates resulting from the war in Iran are depressing the interest-rate-sensitive real estate market.
Sales of used homes fell 5.5% in October to a seasonally adjusted annual rate of 3.75 million units, the National Association of Realtors said in a separate report. This is the lowest level since August 2010, when sales were down with the end of the home purchase tax credit. This incentive was intended to stimulate demand following the 2008 global financial crisis.
Economists expected home resales to decline at a rate of 3.85 million units. Sales plunged 8.8% on an annual basis in October. The decline in sales occurred across all price categories, including those priced at $1 million and above, which had seen strong growth in previous months.
The 30-year fixed mortgage rate jumped above 7% in late August, reaching 7.40% in mid-September, for a total of 142 basis points since the attack on Iran by the United States and Israel in late February, according to data from mortgage finance agency Freddie Mac.
It averaged 7.11% last week, compared to 7.18% the week before.
“Buying a home is tough as mortgage rates hit their highest levels since 2000, except for a single month in 2023,” said Lawrence Yun, NAR chief economist.
The NAR’s Housing Affordability Index fell to 100.7 from 107.3 in October 2025.
Existing housing inventory increased 1.3% to 1.590 million units, the highest level since November 2019. Supply increased 4.6% from a year ago. At October’s sales pace, it would take 5.1 months to exhaust the current inventory of existing homes, the highest since November 2015. That was up from 4.4 months a year ago. The median existing home price increased 0.4% last month from a year ago, to $421,900, the highest price on record in October.
First-time buyers represented 29% of sales, compared to 32% a year ago. A 40% share in this category is necessary for a robust housing market. The weakness in the property market is driven by demand, with rising prices keeping distressed sales at a negligible 2%.
“With mortgage rates expected to remain above 7% for most of 2027, we expect home sales to remain below 4 million through the end of next year,” said Nancy Vanden Houten, chief U.S. economist at Oxford Economics.
(Reporting by Lucia Mutikani; editing by Chizu Nomiyama, Paul Simao and Andrea Ricci)
