By Lucie Mutikani
WASHINGTON, Nov 5 (Reuters) – The number of Americans filing new claims for unemployment benefits fell to a 57-year low last week, a sign of the job market’s resilience even as uncertainty over the lingering conflict in the Middle East limits hiring.
Other Labor Department data released Thursday showed stronger-than-expected growth in worker productivity in the third quarter. Rising productivity lowered labor costs for the first time in more than a year and reinforced the view among policymakers and economists that the labor market was not a source of inflation.
Mild wage inflation gives the Federal Reserve more room to focus on growing price pressures resulting from the U.S.-Israeli war against Iran. Anger over the conflict, now in its ninth month, has cost President Donald Trump’s Republican Party control of Congress, with Democrats performing well in this week’s midterm elections.
Initial claims for state unemployment benefits fell by 6,000 to a seasonally adjusted 189,000 for the week ended Oct. 31, the Labor Department said. Economists polled by Reuters had forecast 196,000 claims for last week.
Claims reached the level of 189,000 reached in mid-July, the lowest figure since 1969. They have remained 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 see the low level of jobless claims as being a function of a reduced working population in a context of immigration crackdowns, rather than a reduction in job losses.
Others thought the job market might tighten. 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 greater than 1,000 last week. A separate report from global outplacement firm Challenger, Gray and Christmas showed that U.S.-based employers announced 43,994 job cuts in October, up 2% from September. Planned layoffs fell 71% compared to October 2025.
Despite the increase during the month, layoffs were the lowest in an October since 2023. Employers announced plans to hire 444,692 workers last month, up 57% from October 2025. Hiring plans were the highest in an October since 2009, and they were likely to be mostly seasonal jobs.
“Employers are holding on to the workers they have as the holidays approach, and the hiring they’re announcing is largely short-term seasonal work,” said Andy Challenger, chief revenue officer at Challenger, Gray & Christmas. “Businesses want to have the flexibility to meet vacation demand without adding permanent headcount.”
The reluctance to increase permanent hiring means that some unemployed people experience long periods of unemployment.
The claims report showed that the number of people receiving unemployment benefits after an initial week of aid, an indicator of hiring, increased by 23,000 to a still-low 1.718 million on a seasonally adjusted basis in the week ended Oct. 24.
However, so-called continuing claims do not include some unemployed workers, including recent college graduates and others who have little or no work history. Some may also have exhausted their eligibility for benefits, limited to 26 weeks in most states, “keeping continued claims at relatively low levels.”
The claims report has no bearing on the government’s October jobs report, due Friday, because it falls outside the survey period. Nonfarm job creation likely increased by 65,000 last month after increasing by 29,000 in September, according to a Reuters survey of economists. The unemployment rate is expected to remain unchanged at 4.2%. The Chicago Fed projects an unemployment rate of 4.14%, which would round to 4.1%.
US stocks were down. The dollar remained stable against a basket of currencies. US Treasury yields fell.
REDUCED LABOR COSTS
A separate report from the Labor Department’s Bureau of Labor Statistics showed that nonfarm productivity, which measures hourly output per worker, increased at an annualized rate of 3.6% in the third quarter after growing at an upwardly revised pace of 2.1% in the second quarter.
Economists expected productivity to increase at a rate of 2.8%, following a previously reported growth rate of 1.4% in the second quarter. Productivity is volatile from one quarter to the next. It increased at a rate of 2.1% from a year ago. Economists and policymakers hope that a spending blitz on artificial intelligence will result in significant productivity gains.
“AI has yet to make a notable contribution. Productivity gains have been fairly consistent over the past few years,” said Stephen Stanley, chief US economist at Santander US Capital Markets. “What we have seen is a transformation of the economy resulting from the trauma of the pandemic. Businesses have had to find new ways to operate during the pandemic and many of their improvisations have resulted in lasting improvements in their efficiency.”
Unit labor costs – the price of labor per unit of output – fell at a rate of 0.7% last quarter. This is the first decline since the second quarter of 2025 and follows an upwardly revised growth rate of 1.9% in the second quarter. The data also showed workers’ share of economic output falling to new lows.
Economists expected labor costs to rise at a rate of 0.6%, following previously reported growth of 1.2%. Labor costs increased at a rate of 2.4% from a year ago. They followed last week’s data 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 labor market “is not a source of inflation.”
The US central bank last week left its benchmark overnight interest rate in the range of 3.75% to 4.00%, while acknowledging that inflation “remains elevated”. Economists expect the Fed to increase borrowing costs in December.
“The Fed will be somewhat reassured by continued strong productivity gains and moderation in unit labor costs, although any signs of the labor market starting to tighten would weigh in favor of further rate hikes,” said Sal Guatieri, senior economist at BMO Capital Markets.
(Reporting by Lucia Mutikani; editing by Chizu Nomiyama and Andrea Ricci)
