The number of Americans filing new applications for unemployment benefits increased marginally last week, pointing to a labour market that is still holding steady rather than weakening sharply. The rise was small in numbers and came in below expectations, indicating that job growth likely continued at a modest pace in January.
The Labour Department reported that US filings for jobless aid rose by 1,000 to 200,000 for the week ending January 17, compared to 199,000 the previous week. This figure came in below analyst expectations, as economists surveyed by FactSet had predicted 207,000 new applications.
Seasonal data issues mask the real trend
In recent weeks, weekly jobless claims data released by the US Department of Labor have been distorted by difficulties in adjusting for seasonal factors around the year-end holidays.
Regardless of this volatility, economists and policymakers say the broader picture remains unchanged, the labour market is in a “low-hiring, low-firing” phase, where companies are neither adding many jobs nor laying off workers aggressively.
Growth without jobs raises concerns
At the same time, the economy is growing without generating many new jobs. Fresh data showed gross domestic product grew faster than initially estimated in the third quarter, helped by strong consumer spending, heavy business investment in artificial intelligence, and a smaller trade deficit. Still, this growth is not translating into widespread hiring.
“The United States is experiencing a jobless boom where strong growth is powered by AI investments and consumption by wealthier families, but there is almost no hiring,” said Heather Long, chief economist at Navy Federal Credit Union to Reuters. “It’s an uneasy situation for many middle-class families. One of the big questions for 2026 is whether the middle class will start to feel the uplift from the boom.”
Policy uncertainty and AI slow hiring
Economists say President Donald Trump’s aggressive trade and immigration policies have reduced both the demand for workers and the supply of labour. At the same time, many businesses are uncertain about future staffing needs as they pour money into artificial intelligence, choosing to invest in technology rather than expand payrolls.
Payroll growth losing momentum
The claims data covered the period used to calculate January’s nonfarm payrolls. Payrolls rose by 50,000 jobs in December, roughly in line with the monthly average for 2025. However, an upcoming benchmark revision from the Bureau of Labor Statistics is expected to show that job growth began slowing in 2024. The agency has already estimated that about 911,000 fewer jobs were created in the 12 months through March 2025 than previously reported.
The BLS said the overcounting was partly due to its “birth-death” model, which estimates job gains and losses from businesses opening and closing. Starting with the January report, the agency will adjust this model to include more up-to-date sample data each month.
Continuing claims fall
The number of people continuing to receive unemployment benefits fell by 26,000 to 1.849 million in the week ended January 10. This usually signals stronger hiring, economists caution that the drop may show seasonal adjustment issues or people exhausting their benefits, which typically last up to 26 weeks.
Separately, the Commerce Department’s Bureau of Economic Analysis said GDP grew at a revised 4.4% annual rate in the third quarter, the fastest pace since late 2023. Growth was driven by consumer spending, exports, business investment, and a narrower trade deficit. Consumer spending alone rose at a 3.5% pace, though spending on goods was revised slightly lower.
A K-shaped economy takes hold
Economists say the economy is showing a K-shaped pattern. Higher-income households and large corporations are benefiting the most, supported by rising stock markets and high home prices. Lower- and middle-income families, however, are squeezed by tariffs that have pushed up prices and by limited options to switch spending.
Large companies can absorb higher import costs, but small businesses are struggling. Many are barely staying afloat as they face higher costs and reduced access to low-cost labour due to stricter immigration policies.
Corporate profits from current production rose at a $175.6 billion annual rate in the third quarter, higher than previously thought. Inflation, however, also picked up. The price index for gross domestic purchases rose at a 3.4% rate, the fastest since early 2023. Core inflation, measured by the Personal Consumption Expenditures Price Index excluding food and energy, increased at a 2.9% rate.