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The US economy seems to have started its New Year’s resolutions a week early: In the last week of December, fewer people filed for new unemployment benefits than at any time since April. Speaking of resolutions, this latest sign of economic strength could end up providing extra motivation for the Federal Reserve to stick with its plans to cut rates just twice this year.
People filing for new benefits fell by 9,000 from the previous week to 211,000, seasonally adjusted, for the week ending December 28, the Labor Department reported Thursday. That number hasn’t been so low since April, Reuters reported, and is 5% lower than what Reuters economists had expected.
The number of people filing for unemployment benefits also fell by 52,000 week over week at the end of December, the Labor Department reported.
At its meeting last month, the Fed projected it would cut the central bank’s benchmark interest rate to 3.9% in 2025, which would be a half-point less than it forecast in September and a “suggest[ion] that they will make just two rate cuts,” the New York Times reported, compared to the four cuts the Fed predicted for 2025 in September.
Steady Feddy. The central bank’s approach won’t change unless hiring slows dramatically, LPL Financial chief economist Jeffrey Roach told Reuters. “A stable job market will squelch the Fed’s appetite for cutting rates aggressively amid nagging services inflation," he said. We’ll have to wait until Jan. 10 for December’s jobs data, but we know that the economy added 227,000 jobs, seasonally adjusted, in November.
That showed a quick recovery from October’s measly 12,000 new jobs, far lower than expected, which the Wall Street Journal chalked up to the Boeing machinists’ strike and severe weather in the southeast. (The Fed will also be watching out for the potential inflationary effects of the tariffs, tax cuts, and mass deportations proposed by President-elect Donald Trump.)
Strength to strength. Like we said, it wasn’t just jobless claims that signaled good news. Recent reports on consumer spending and factory equipment orders suggest the economy is starting 2025 off strong. Visa and Mastercard each released data during Christmas week showing that holiday-season spending had surpassed their expectations, the Washington Post reported. Retail sales grew 3.8% YoY for the Nov. 1 to Dec. 24 shopping season, according to Mastercard, while “Visa reported a better-than-expected 4.8 percent annual increase in US retail sales in the seven weeks following Nov. 1.”
Manufacturers also showed some confidence in the most recent durable goods report. Economists expected factory orders to grow 0.1% in November, but they shot up 0.7%, according to Treasury & Risk, which reported that manufacturers may be “more comfortable making long-term investments now that the election has passed” and “buyers [are] looking to get ahead of higher prices that may result from new tariffs when Donald Trump takes office.” On Jan. 6, we’ll get our first look at whether factories kept up their durable goods orders in December.