New filings for jobless claims last week fell slightly, to 184,000, holding steady below the average pre-pandemic level for the 12th straight week. The number of new claims points to a labor market that remains tight, with layoffs at multi-decade lows.

The data released by the Labor Department on Thursday captured unemployment benefit claims for the week ending April 16—the same period that will be covered by the monthly jobs report to be released in the first week of May.

That means we should expect another solid month of job gains for April. But it will not likely change the Federal Reserve’s plan to raise interest rates by a half percentage point at its meeting on May 15 and 16. Depending on how strong the jobs report turns out to be, the likelihood of similar rate hikes after that meeting should become clearer.

Given the Fed’s hawkish tone in recent months, labor demand will become the first casualty in the fight against inflation as the economy moderates because of rising rates. But it will take six to nine months for the impact of rising rates to be felt throughout the economy.

During that time, we should expect initial jobless claims to hover not too far below the pre-pandemic level as the imbalance between labor demand and supply has most likely peaked.

Our preferred measure for the long-term trend in jobless claims, the 13-week moving average, continued to decline yet at a slower pace since January compared to the October-December period of last year. We expect the trend to continue to slow in the coming months.

The takeaway

The number of continuing claims for the week ending April 9 declined from 1.48 million to 1.42 million. With the labor force participation rate rising, it is likely that many have stayed off unemployment benefit programs and found new jobs.