WRAPUP 2-US weekly jobless claims fall; trade deficit widens by the most in nearly 34 years

While difficulties adjusting the weekly unemployment claims data for seasonal fluctuations around ‌the year-end holiday season and turn of the year have injected volatility into the numbers, economists said there has been no material change in labor market conditions. Federal Reserve Chair Jerome Powell told reporters on Wednesday that "labor market indicators suggest that conditions may be stabilizing after a period of gradual softening." The U.S. central bank left its benchmark overnight interest rate in the 3.50%-3.75% range.

The number of Americans filing new applications for unemployment benefits fell last week from an upwardly revised level in the prior week, suggesting layoffs remained low, but tepid hiring is stoking households' anxiety about the labor market. While difficulties adjusting the weekly unemployment claims data for seasonal fluctuations around ‌the year-end holiday season and turn of the year have injected volatility into the numbers, economists said there has been no material change in labor market conditions.

Federal Reserve Chair Jerome Powell told reporters on Wednesday that "labor market indicators suggest that conditions may be stabilizing after a period of gradual softening." The U.S. central bank left its benchmark overnight interest rate in the 3.50%-3.75% range. "There is no evidence that layoffs are picking up. There are firms that are trying to reduce their headcount, but ⁠this is being done almost exclusively through attrition rather than outright job cuts," said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets. "Layoffs on an underlying basis are roughly steady."

Initial claims for state unemployment benefits dropped 1,000 to a seasonally adjusted 209,000 for the week ended January 24, the Labor Department said on Thursday. The prior week's level of claims was revised up by 10,000 to 210,000. Economists polled by Reuters had forecast 205,000 claims for the latest week. The claims data included last Monday's Martin Luther King Jr. holiday. Claims tend to be noisy around public holidays. More volatility is likely in the weeks ahead after a winter storm brought snow and freezing temperatures to a ​large part of the country over the weekend.

Economists say companies are reluctant to lay off workers while assessing what they have called an ever-shifting economic landscape, mostly related to tariffs on imports. United Parcel Service and Amazon.com announced job cuts this week, but those layoffs will probably not have a significant impact on claims. ‍High-profile layoffs last year, including from those two companies, did not result in a notable surge in jobless claims.

Stocks on Wall Street were trading lower. The dollar fell against a basket of currencies. Longer-dated U.S. Treasury yields rose. CONSUMERS PESSIMISTIC ABOUT LABOR MARKET

The number of people receiving unemployment benefits after an initial week of aid, a proxy for hiring, decreased 38,000 to a seasonally adjusted 1.827 million during the week ended January 17, the claims report showed. The so-called continuing claims figures also have been impacted by the seasonal adjustment challenges.

Some economists believe continuing claims were being pushed lower by people dropping off unemployment rolls because they had exhausted their eligibility for benefits, limited to 26 weeks in most states. Others viewed the third straight weekly decline as consistent with the low level of layoffs. Continuing claims covered the period ⁠during which the government surveyed ‌households for January's unemployment rate. The jobless rate slipped to 4.4% in December from 4.5% ⁠in November. Unemployment has been prevalent among young adults, most of whom do not qualify for benefits because they have never worked or have a limited employment history. The unemployment rate likely remained elevated this month. The Conference Board's employment measures deteriorated in January. Economists attributed tepid hiring to tariffs and immigration raids that have reduced demand and supply of labor as well as businesses being uncertain of their ‍staffing needs as they invest heavily in artificial intelligence.

"We should still be concerned about the possibility of rising unemployment, though the drop in claims remains a positive leading signal if sustained," said Abiel Reinhart, an economist at J.P. Morgan. The Chicago Fed is forecasting the unemployment rate for January will be 4.35%, which would round up to 4.4%. The Bureau of Labor Statistics' closely watched ​employment report for January, scheduled for release next Friday, could be delayed if the government shuts down again over the weekend due to an impasse over funding for the U.S. Department of Homeland Security. Democrats in the U.S. Senate have demanded new restrictions on DHS enforcement efforts following a second ⁠fatal shooting by federal agents in Minneapolis recently. Congress faces a January 30 deadline to fund the government or risk a partial government shutdown. A shutdown would not affect data releases from the Commerce Department's statistical agencies, which are funded through September 30.

The Bureau of Economic Analysis and Census Bureau reported that the trade deficit widened by 94.6%, the largest increase since March 1992, to $56.8 billion in November amid a surge in capital goods ⁠imports that was likely driven by an AI investment boom. Economists had forecast the trade deficit would rise to $40.5 billion. The deterioration in the trade deficit prompted the Atlanta Fed to slash its fourth-quarter GDP growth estimate to a 4.2% annualized rate from a 5.4% pace. Goldman Sachs lowered its forecast to a 2.0% rate from a 2.4% pace.

Trade contributed to GDP growth in the second and third quarters of 2025. The economy grew at a 4.4% pace in the July-September quarter. The trade report was delayed because of the U.S. government shutdown late last year. Imports jumped 5.0% to $348.9 billion. Goods imports advanced 6.6% to $272.5 billion, with capital goods soaring $7.4 billion ⁠to a record high. They were boosted by strong gains in imports of computers and semiconductors. But imports of computer accessories decreased by $3.0 billion.

Consumer goods imports increased by $9.2 billion, lifted by pharmaceutical preparations. There have been large swings in imports of pharmaceutical preparations, likely related to U.S. tariffs. Imports of industrial supplies fell ⁠by $2.4 billion. Exports tumbled 3.6% to $292.1 billion. Goods exports plunged 5.6% to $185.6 billion, pulled down by ‌a decline of $6.1 billion in shipments of industrial supplies and materials amid decreases in non-monetary gold, other precious metals as well as crude oil, which dropped by $1.4 billion.

Consumer goods exports decreased $3.1 billion as pharmaceutical preparations shipments fell. The goods trade deficit widened 47.3% to $86.9 billion. Imports of services fell, while exports in that category were the highest on record. "It remains to be seen where imports settle after seeing some pull-forward earlier in the year ahead of tariffs and then some payback since," said ⁠Shannon Grein, an economist at Wells Fargo. "There has been little indication yet of a large onshoring of manufacturing operations in the wake of tariffs, which suggests import growth will likely recover somewhat this year as businesses rebuild some inventory ‍to meet demand."

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