The number of Americans filing new applications for unemployment benefits unexpectedly fell last week to its lowest level in more than five decades, underscoring the resilience of the United States labour market and reinforcing expectations that the Federal Reserve will remain focused on tackling inflation.
Initial claims for state unemployment benefits dropped by 22,000 to a seasonally adjusted 187,000 in the week ended 18 July, according to data released by the Labor Department on Thursday.
The decline, the largest in three months, pushed claims to their lowest level since September 1969.
Economists had expected initial claims to rise to 212,000, making the latest reading a significant upside surprise.
The report covered the survey period used for July's nonfarm payrolls report, due in about two weeks, and added to evidence that the U.S. labour market remains on solid footing despite elevated borrowing costs.
Continuing claims, which measure the number of people receiving unemployment benefits for more than one week and serve as a proxy for hiring conditions, fell to a six-week low of 1.796 million in the week ended 11 July.
The latest data follows June's employment report, which showed the unemployment rate unexpectedly eased to 4.2%, a one-year low.
However, the decline was largely driven by a fall in labour force participation rather than a sharp acceleration in hiring.
The U.S. labour market has remained remarkably balanced, with restrained labour supply, moderate job creation and limited layoffs helping to keep unemployment near historically low levels.
That resilience has prompted a growing number of Federal Reserve officials to place greater emphasis on persistent inflation, which remains well above the central bank's 2% target.
The Federal Reserve is scheduled to meet next week, and the stronger-than-expected labour market data, combined with another sharp rise in oil prices amid escalating hostilities involving the U.S., Israel and Iran, has increased expectations of further policy tightening.
According to the CME FedWatch Tool, interest rate futures now imply nearly a 35.8% probability that the Fed will raise its benchmark interest rate by 25 basis points to a range of 3.75% to 4.00% at the conclusion of its two-day policy meeting.
