By Lucia Mutikani
WASHINGTON, Feb 12 (Reuters) – The number of Americans filing new applications for unemployment benefits decreased less than expected last week, but the decline was consistent with economists’ view that the labor market was stabilizing after hitting a soft patch last year.
Economists said the Trump administration’s trade and immigration policies were constraining the labor market, mostly through tepid hiring, though they were optimistic employment growth would pick up this year partly because of tax cuts.
“The picture of the labor market gleaned from the claims data is not one of deteriorating conditions,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics. “The labor market has stabilized and will improve over 2026.”
Initial claims for state unemployment benefits dropped 5,000 to a seasonally adjusted 227,000 for the week ended February 7, the Labor Department said on Thursday.
Economists polled by Reuters had forecast 222,000 claims for the latest week. The fall reversed only a fraction of the prior week’s jump, blamed on snowstorms and frigid temperatures across much of the country as well as normalization following seasonal volatility at the end of last year and beginning of 2026. Claims have moved in a 192,000-237,000 range since the end of November.
“The latest print … might still be getting a boost from the cold temperatures that followed Winter Storm Fern,” said Abiel Reinhart, an economist at JPMorgan. “Overall, the claims data still doesn’t look too concerning, and we should get a cleaner read on it as temperatures normalize.”
The government reported on Wednesday that job growth accelerated in January and the unemployment rate fell to 4.3% from 4.4% in December. But revisions showed the labor market almost stalled last year, with job growth averaging 15,000 per month. Some economists, however, saw the smaller-than-expected decline in claims as a sign the labor market remained weak.
“Jobless claims suggest that the labor market remains just as subdued as last year, casting further doubt over the sustainability of January’s reported jump in payrolls,” said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.
The number of people receiving unemployment benefits after an initial week of aid, a proxy for hiring, increased 21,000 to a seasonally adjusted 1.862 million during the week ended January 31, the claims report showed. The so-called continuing claims have also been impacted by seasonal volatility.
Though fewer people experienced longer bouts of unemployment in January, the median duration of joblessness remained near levels last seen four years ago. Recent college graduates are having a tough time finding jobs.
Labor market stability has reduced the odds of the Federal Reserve cutting interest rates before the end of Fed Chair Jerome Powell’s term in May. The Fed last month left its benchmark overnight interest rate in the 3.50%-3.75% range.
EXISTING HOME SALES TUMBLED IN JANUARY
News on the housing market was downbeat. Sales of previously owned homes dropped 8.4% in January to a seasonally adjusted annual rate of 3.91 million units, the lowest level since December 2023, the National Association of Realtors said in a separate report. Economists had forecast home resales declining to a rate of 4.18 million units.
January’s percent decline was the largest in nearly four years. Home resales are counted at the closing of a contract. Last month’s sales likely reflected contracts that were signed in November and December. Economists speculated that winter storms that slammed large parts of the country in January could have impacted contract closings.
There have also been reports of contracts falling through as more prospective buyers are asking for home inspections. Home sales decreased 4.4% on a year-over-year basis, with the decline spread across all four regions.
Higher mortgage rates have weighed on home sales. Though borrowing costs have declined as the Federal Housing Finance Agency, which oversees mortgage finance giants Fannie Mae and Freddie Mac, started buying bonds issued by the two companies, progress has stalled. Mortgage rates track the benchmark 10-year Treasury yield, which has risen amid high inflationary pressures and worries over federal government debt.
The NAR said its housing affordability index increased to 116.5 in January, the highest since March 2022, from 111.6 in December, as wage gains outpaced house price inflation.
Still, limited housing inventory, especially at the lower end of the price spectrum, is hampering sales. The inventory of existing homes fell 0.8% to 1.22 million units.
Supply was up 3.4% from a year ago. At January’s sales pace, it would take 3.7 months to exhaust the current inventory of existing homes, up from 3.5 months a year ago.
The median existing home price last month rose 0.9% from a year ago to $396,800. Slowing house price growth could also be making some potential sellers reluctant to list their homes.
The median days on the market for listed properties increased to 46 from 41 a year ago. First-time buyers accounted for 31% of sales, up from 28% a year ago. Economists and realtors say a 40% share in this category is needed for a robust housing market. All-cash sales constituted 27% of transactions, compared to 29% a year ago.
Distressed sales, including foreclosures, made up 2% of transactions, down from 3% a year ago.
“Recent improvements in affordability lead us to believe that January’s weakness will prove temporary,” said Bradley Saunders, North America economist at Capital Economics. “However, with the window for further Fed easing narrowing, we expect borrowing costs to begin to climb again …prompting sales to drop back by the end of the year.”
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)
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