New claims for jobless benefits fell by 5,000 last week to 180,000 as labor demand continued to be robust and layoffs remained historically low.

This marked the 13th week in a row that new jobless claims stayed below the pre-pandemic level in 2019 at 214,000. Our long-term measure that strips out weekly volatility—the 13-week moving average—continued to trend downward.

Still, we expect the trend to level off in the next couple of months as the economy slows because of fading fiscal support and tightened monetary policy.

Demand for labor will most likely moderate, but the pace of moderation will depend heavily on how fast the Federal Reserve raises interest rates.

While a labor market with plentiful jobs is a strong foundation for economic growth, it can be a double-edged sword if the market remains too tight for too long, which, in the words of Federal Reserve Chairman Jerome Powell, is unhealthy.

But it is unlikely that a sharp turn in labor demand and an increase in layoffs will take place soon as the Fed has been trying to prioritize a soft landing.

If the Fed succeeds in crafting a soft landing, which seems to be a tall order, we should expect new jobless claims to stay below the pre-pandemic level before moving back up as the economy heads toward its long-term growth rate.