The number of Americans filing new applications for unemployment benefits declined last week, indicating that layoffs remain limited even as job creation in the United States slowed sharply in September. Weekly jobless claims have stayed close to their lowest levels in 57 years for four consecutive weeks, highlighting the mixed conditions facing the US labor market. According to the US Labor Department’s report released on Thursday, initial claims for state unemployment benefits fell by 2,000 to a seasonally adjusted 197,000 for the week ended October 3. Economists surveyed by Reuters had expected claims to reach 200,000.
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Claims have remained below the 200,000 mark since the second week of September. The four-week moving average, which helps smooth out weekly fluctuations and provides a clearer picture of labor market trends, declined by 2,500 to 198,000. This was the lowest reading since early October 2022.
California and Illinois were the only states to report an increase of more than 1,000 in unadjusted initial claims.
US Labor Market Remains in a Low-Hire, Low-Fire Phase
Despite strong corporate profit growth and stock market performance, employers have been reluctant to expand their workforces. While companies are holding on to existing employees, job seekers are finding it increasingly difficult to secure new positions.
Economists have linked the cautious hiring environment to economic uncertainty, initially driven by tariffs and later intensified by the US-Israeli war with Iran. The conflict has pushed diesel prices to record highs and increased the prices of other commodities.
“It’s still a ‘low-hire, low-fire’ job market,” said Heather Long, chief economist at Navy Federal Credit Union. “That’s great for anyone who has a job and wants to keep it, but it’s tough for job seekers.”
The latest figures suggest that widespread layoffs have not emerged, but the lack of new hiring opportunities remains a concern for workers entering or returning to the labor market.
September Job Growth Slows Sharply
The latest claims data comes after the government reported that US nonfarm payrolls increased by just 29,000 jobs in September. Economists say subdued hiring, retirements and tighter immigration policies are contributing to a shrinking labor pool and limiting overall employment growth.
Minutes from the Federal Reserve’s September 15–16 policy meeting, published on Wednesday, showed that officials “judged that labor market conditions were stable and generally viewed the labor market as close to maximum employment.” The minutes also noted that policymakers “generally viewed the upside and downside risks to the labor market as broadly balanced.”
The Federal Reserve raised its benchmark overnight interest rate by 25 basis points last month, taking it to a range of 3.75%–4.00%. It was the first rate increase in three years, and policymakers indicated that borrowing costs could rise further in the coming months.
However, weaker-than-expected September job growth and cooler-than-anticipated inflation readings for July and August reduced expectations of another rate increase this month. Economists continue to anticipate a possible rate hike in December.
Continued Jobless Claims Rise to 1.716 Million
The Labor Department report also showed that the number of people continuing to receive unemployment benefits after their initial week of assistance increased by 17,000 to a seasonally adjusted 1.716 million for the week ended September 26.
These continued claims, which can provide an indication of how easily unemployed people are finding new jobs, had fallen to a three-and-a-half-year low in the previous week.
Some economists cautioned that the relatively low level of continued claims could be masking a gradual weakening in employment conditions. Recent college graduates and other new entrants to the workforce may not qualify for unemployment benefits because they have limited or no work history. Some long-term unemployed workers may also have exhausted their eligibility, which is limited to 26 weeks in most states.
The median duration of unemployment reached 11.5 weeks in September, close to a four-and-a-half-year high. The US unemployment rate stood at 4.2% last month.
“An ongoing rise in unemployment among new entrants and re-entrants to the labor market, amid weak hiring, will put some further gentle upward pressure on the unemployment rate over the next few quarters,” said Samuel Tombs, chief US economist at Pantheon Macroeconomics.
Wholesale Sales Strengthen as Businesses Rebuild Inventories
A separate report from the Commerce Department’s Census Bureau showed that US wholesale sales increased by 1.8% in August, following a 1.0% rebound in July. Strong demand helped limit inventory growth during the month.
Wholesale inventories rose by a downwardly revised 0.5% in August, compared with the previously reported 0.7% increase. Inventories had climbed 1.4% in July and were up 6.4% year over year in August.
Businesses have been rebuilding inventories after five consecutive quarters of drawdowns amid strong consumer spending and investment in artificial intelligence. This restocking activity has also contributed to higher imports.
Capital goods imports reached a record high in August, according to government data released earlier this week, suggesting that business investment in equipment remained strong during the July–September quarter.
Economists estimate that trade could reduce third-quarter GDP growth by as much as 2.5 percentage points. However, inventories are expected to contribute to growth after subtracting 0.53 percentage point from GDP in the second quarter.
Most estimates place US economic growth at around a 3.0% annualized rate in the third quarter, supported by solid consumer spending. The economy expanded at a 2.2% pace in the second quarter.
At August’s sales pace, wholesalers would need approximately 1.18 months to clear their inventories, close to a 14-year low and down from 1.19 months in July. The inventories-to-sales ratio stood at 1.28 months in August 2025.
What the Latest Jobless Claims Data Means for the US Economy
The latest report presents a mixed picture of the US economy. Low initial jobless claims suggest that employers are continuing to retain workers, while weak payroll growth, rising continued claims and a longer median unemployment duration point to growing challenges for job seekers.
For the Federal Reserve, the balance between employment conditions and inflation will remain important when assessing future interest rate decisions. Investors will continue to monitor labor market indicators, inflation data and economic growth for clues about the direction of US monetary policy.
FAQ’s
1. Why have US jobless claims remained near 57-year lows despite slowing employment growth?
US jobless claims have remained low because employers are largely retaining their existing workers rather than making widespread layoffs. However, businesses remain cautious about hiring additional employees amid economic uncertainty, tariff concerns and geopolitical tensions. This combination has created a low-hire, low-fire labor market in which existing workers face greater job security than people searching for new employment.
2. How many Americans filed initial unemployment claims in the latest reporting week?
Initial applications for state unemployment benefits declined by 2,000 to a seasonally adjusted 197,000 during the week ended October 3, 2026. The figure was below economists’ expectations of 200,000. Meanwhile, the four-week moving average dropped to 198,000, its lowest level since early October 2022, indicating that initial layoffs remained limited.
3. What do rising continued jobless claims indicate about employment conditions in the United States?
Continued jobless claims increased by 17,000 to 1.716 million for the week ended September 26, 2026. This suggests that some unemployed Americans may be experiencing difficulties finding new jobs. Economists have also warned that benefit eligibility rules can exclude recent graduates and other workers with limited employment histories, meaning claims data may not capture the full extent of labor market weakness.
4. How could the latest US employment figures influence the Federal Reserve’s future interest rate decisions?
The combination of weak job creation and persistently low initial claims presents a mixed picture for the Federal Reserve. Slower employment growth may reduce the need for additional monetary tightening, while inflation risks could support further rate increases. The Fed raised its benchmark rate by 25 basis points last month to 3.75%–4.00%, and policymakers continue to assess employment conditions alongside inflation trends.
5. What do wholesale sales and inventory figures suggest about the outlook for US economic growth?
US wholesale sales increased by 1.8% in August, following a 1.0% rise in July, while wholesale inventories grew by a revised 0.5%. Businesses have been rebuilding stocks amid consumer demand and investment in artificial intelligence. Although higher imports could weigh on third-quarter GDP growth, inventory rebuilding and consumer spending may provide support to overall economic activity.
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