U.S. Jobless Claims Dip While GDP Growth Revised Sharply Higher

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The U.S. labor market showed surprising resilience last week as first-time jobless claims fell more than expected, while a stronger-than-initially-reported economic expansion in the second quarter added to signs of underlying growth momentum.

Jobless Claims Beat Expectations

For the week ending September 20, initial unemployment claims dropped to 218,000, down by 14,000 from the prior week. Economists had expected claims to rise to around 233,000.

Meanwhile, continuing claims — which track the number of Americans receiving unemployment benefits after the first week — edged slightly lower by 2,000 to 1.926 million. While this suggests some improvement, analysts caution it still reflects persistent challenges for workers facing long-term unemployment.

GDP Growth Revised Upward

The U.S. economy expanded at a 3.8% annualized rate in the second quarter of 2025, according to the Commerce Department’s final estimate. This was an upgrade from the prior 3.3% estimate and well above the initial 3.0% reading.

The stronger print was largely driven by a robust upward revision in consumer spending, underscoring the strength of household demand despite sticky inflation and rising borrowing costs. The result marks a stark turnaround from the 0.5% contraction in Q1 2025.

Fed Policy Outlook in the Spotlight

These figures arrive as the Federal Reserve weighs further rate cuts after trimming borrowing costs by 25 basis points last week. While policymakers acknowledged risks from both weakening labor conditions and stubborn inflation, Thursday’s data complicates the picture by highlighting economic resilience.

The Fed’s dot plot projections signaled a majority of members see another half-point of cuts across the October and December meetings. However, seven of the 19 forecasts implied fewer reductions, while one official — suspected to be newly-appointed Governor Stephen Miran — projected a much steeper decline to a range of 2.75%–3%.

Chicago Fed President Austan Goolsbee on Wednesday reiterated caution, stressing he was not inclined toward aggressive easing given inflation risks. By contrast, Miran has argued that rates are too restrictive and could threaten the labor market if not lowered more decisively.