LIVE MARKETS-Surprise party: Jobless claims, layoffs, productivity, trade balance

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SURPRISE PARTY: JOBLESS CLAIMS, LAYOFFS, PRODUCTIVITY, TRADE BALANCE

A smattering of economic data on Thursday offered a few surprises and set the table for Friday's crucial December jobs report.

Last week, 208,000 U.S. workers joined the queue outside the unemployment office USJOB=ECI, a 4.0% weekly increase, and 2,000 fewer than analysts expected.

Ironing out weekly volatility, the four-week moving average of initial claims now has a clear downward bias, but remains well within the range associated with healthy labor market churn.

At any rate, it would appear that the recent spate of corporate layoff announcements is a no-show in the claims data thus far.

On that subject, outplacement firm Challenger, Gray & Christmas (CGC) USCHAL=ECI reports U.S. firms announced 35,553 layoffs in December. While that number is down 50% from November, it wraps up the worst fourth quarter since 2008.

In 2025, companies have said they'd cut 1,206,374 jobs, a 58% increase from 2024. With respect to hiring, you'd have to go back to 2010 for a weaker annual total.

Even so, hiring picked up in December, with employers announcing plans to add 10,496 jobs, up 16% from November.

“The year closed with the fewest announced layoff plans all year," writes Andy Challenger, senior vice president at CGC. "While December is typically slow, this coupled with higher hiring plans, is a positive sign after a year of high job cutting plans.”

DOGE-related firings were the leading cause of job cut announcements last year, responsible for 293,753 layoffs, or 24.4% of the total.

Tariffs were cited for 7,908 job cuts, while AI was blamed for 54,836 firings.

So far this year, the five most prolific job-cutters by sector are government, technology, warehousing, retail and services.

Continuing jobless claims USJOBN=ECI reported on a one-week lag, jumped 3.0% to 1.914 million, or 14,000 north of consensus.

"Continued claims remain at a level consistent with a slow pace of hiring but are off their recent highs, suggesting that employers aren't pulling back further on hiring," says Nancy Vanden Houten, lead economist at Oxford Economics (OE).

Ongoing claims indeed remain elevated, but consumers seem to disagree with Houten's assessment. Survey data suggests laid-off workers are finding it increasingly difficult to find a replacement gig.

All of the above is prologue to the Labor Department's December employment report due tomorrow, which is expected to show the U.S. economy added an unimpressive 60,000 jobs in the last month of 2025, with the unemployment rate edging down to 4.5%.

Additionally, the Labor Department tossed in a relic from the distant past, in the form of third-quarter labor costs and productivity.

In the July-September period, unit labor costs USLCP=ECI — which gauge the average cost of labor per unit of output produced—unexpectedly dropped 1.9% at a quarterly annualized rate, defying the 1.0% increase predicted by economists and followed a steeper 2.9% drop in Q2, drastically revised downward from the originally stated 1.0% increase.

Productivity USPROP=ECI—which measures average output per hour—surged by 4.9% from the previous quarter's 4.1% growth, also upwardly revised. It marked the fastest rate of productivity growth since Q3 2023.

Consensus called for 3.0% growth.

"The latest figures suggest firms are successfully doing more with less labor, giving more credence to a jobless expansion," writes Matthew Martin, OE's senior economist.

Separately, the Commerce Department released trade data from three months ago, delayed because of the government shutdown.

The report shows the trade gap USTBAL=ECI, or the difference in the value of goods and services imported to the U.S. and those exported abroad, unexpectedly narrowed by a whopping 38.9% to $29.4 billion.

The reading is 50.1% narrower than economists predicted and the narrowest trade gap since 2009.

Under the hood, exports grew by 2.6% with an assist from the weak greenback, while imports - which account for the lion's share of the United States' total international trade and act as a GDP detractor - fell by 3.2%, almost certainly the result of tariffs.

Here's a look at the extent to which the Trump tariffs have affected U.S. imports from China, Mexico and Canada:

(Stephen Culp)

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