Nov. 5, 2026 — The number of Americans filing new claims for unemployment benefits fell to a 57-year low last week, signaling continued resilience in the U.S. labor market. Separate government data also showed stronger-than-expected productivity growth in the third quarter, pushing labor costs lower and reinforcing expectations that employment conditions are not currently a major source of inflation.
The figures suggest that employers are largely holding on to existing workers even as uncertainty surrounding the prolonged conflict in the Middle East weighs on hiring decisions.
The productivity gains could give the Federal Reserve greater flexibility to address inflationary pressures linked to rising energy prices without having to respond as aggressively to wage-driven inflation.
The economic backdrop comes as President Donald Trump’s Republican Party lost control of Congress in this week’s midterm elections, with voter anger over the U.S.-Israeli war with Iran contributing to strong Democratic performances.
Jobless Claims Fall to Lowest Level Since 1969
Initial claims for state unemployment benefits declined by 6,000 to a seasonally adjusted 189,000 for the week ended October 31, according to the Labor Department.
The figure was below the 196,000 claims economists polled had expected. It also matched the level recorded in mid-July, marking the lowest reading since 1969.
Claims have remained mostly below 200,000 since mid-September, suggesting that layoffs remain limited despite uncertainty across the economy.
Strong domestic demand and corporate profit growth have helped employers retain workers. However, some economists cautioned that the low number of claims could partly reflect a smaller labor force resulting from the immigration crackdown rather than a broad decline in job losses.
Other labor market indicators suggest demand for workers remains relatively firm. Government data released earlier this week showed 1.06 job openings for every unemployed person in September, up from 1.02 in August.
No state reported an increase in unadjusted jobless claims exceeding 1,000 last week.
Employers Hold Back on Permanent Hiring
A separate report from global outplacement firm Challenger, Gray & Christmas showed that U.S.-based employers announced 43,994 job cuts in October, up 2% from September.
Despite the monthly increase, planned layoffs were 71% lower than in October 2025. October’s total was also the lowest for that month since 2023.
Employers announced plans to hire 444,692 workers last month, a 57% increase from October 2025. Hiring plans reached their highest October level since 2009, although much of the activity was likely tied to seasonal positions.
“Employers are holding on to the workers they have heading into the holidays, and the hiring they are announcing is largely short-term, seasonal work,” said Andy Challenger, chief revenue officer at Challenger, Gray & Christmas.
He added that companies want flexibility to meet holiday demand without increasing permanent staffing levels.
The cautious approach to long-term hiring may leave some unemployed Americans struggling to find new positions.
The number of people receiving unemployment benefits after an initial week of assistance, known as continuing claims, increased by 23,000 to a seasonally adjusted 1.718 million for the week ended October 24.
However, continuing claims do not capture everyone without a job. Recent graduates and people with limited work histories may not qualify for benefits, while others may have exhausted their eligibility, which is generally limited to 26 weeks in most states.
October Jobs Report Expected to Show Modest Growth
Thursday’s claims data does not affect the government’s closely watched October employment report scheduled for Friday because it falls outside the survey period.
Economists surveyed expect nonfarm payrolls to have increased by 65,000 jobs in October, following a gain of 29,000 in September.
The unemployment rate is forecast to remain unchanged at 4.2%. The Chicago Federal Reserve projects a rate of 4.14%, which would round down to 4.1%.
The upcoming employment report will provide another indication of whether the labor market is stabilizing or beginning to tighten.
Productivity Growth Pushes Labor Costs Lower
Separate data from the Labor Department’s Bureau of Labor Statistics showed nonfarm productivity increased at an annualized rate of 3.6% in the third quarter.
The measure, which tracks hourly output per worker, followed an upwardly revised growth rate of 2.1% in the second quarter. Economists had expected third-quarter productivity growth of 2.8%, after the second-quarter figure was previously reported at 1.4%.
Productivity increased at a 2.1% rate compared with the same period a year earlier.
Economists and policymakers have been watching for signs that increased investment in artificial intelligence could translate into substantial productivity improvements.
However, Stephen Stanley, chief U.S. economist at Santander US Capital Markets, said the recent gains should not yet be attributed to AI.
“AI has yet to make a noticeable contribution. Productivity gains have been fairly consistent over the past several years,” Stanley said.
He pointed instead to lasting operational changes introduced by businesses during the pandemic, when companies were forced to develop new ways of working.
Unit Labor Costs Decline for First Time Since 2025
The productivity increase helped push unit labor costs, which measure the price of labor required to produce one unit of output, down by an annualized 0.7% in the third quarter.
It was the first decline since the second quarter of 2025 and followed an upwardly revised increase of 1.9% in the previous quarter.
Economists had expected unit labor costs to rise at a 0.6% rate, following a previously reported second-quarter increase of 1.2%.
On a year-over-year basis, labor costs increased 2.4%.
The report also showed that workers’ share of total economic output fell to a new record low in the third quarter of 2026. The labor share represents the portion of economic output paid to workers through compensation.
The decline highlights an uneven distribution of economic gains, even as productivity improves.
The figures followed last week’s Employment Cost Index report, which showed a moderate increase in overall labor costs during the third quarter.
Federal Reserve Faces Inflation and Rate Decisions
The productivity and labor-cost figures could offer some reassurance to Federal Reserve policymakers as they assess the outlook for inflation.
The central bank left its benchmark overnight interest rate unchanged within a range of 3.75% to 4.00% last week, while acknowledging that inflation remains elevated.
With crude oil prices rising amid the Middle East conflict, the Fed faces renewed pressure to prevent energy-driven price increases from spreading throughout the economy.
Economists currently expect the central bank to raise borrowing costs in December.
“The Fed will take some comfort from continued solid productivity gains and subdued unit labor costs, though any evidence that the job market is starting to tighten would weigh toward additional rate hikes,” said Sal Guatieri, senior economist at BMO Capital Markets.
Thursday’s market reaction was cautious. U.S. stocks traded lower, the dollar was steady against a basket of currencies, and Treasury yields declined.
The latest figures present a mixed picture for policymakers: layoffs remain unusually low, productivity is accelerating and labor costs are easing, but permanent hiring remains cautious and inflation risks have not disappeared. The October employment report and developments in energy prices are likely to play an important role in shaping the Federal Reserve’s next decisions.
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