Despite lethargic growth in private-sector payrolls and big staff cuts at federal and state governments, but a declining labor force due to the crackdown on illegal immigration.

By Wolf Richter for WOLF STREET.

The four-week average of initial applications for unemployment insurance benefits fell to 194,700, the lowest since 1969, according to the Labor Department today. For just the week through Saturday, initial applications for unemployment benefits fell to 189,000, same as in mid-July, and both were the lowest since 1969.

But the population, the labor force, and employment are vastly bigger now than in the 1960s. So these initial applications, historically low in absolute terms, are amazingly low in relative terms.

The four-week average irons out the week-to-week volatility caused by some states missing the reporting deadline, with those weekly claims then falling into the following week. The purple columns indicate recessions, and what happens to initial claims for unemployment benefits before and during recessions.

There have been waves of layoffs at some companies through the left door, while they hired through the right door – big tech has been doing that now since 2022. Overall, private-sector companies have added to their payrolls at a lethargic pace, with some sectors experiencing labor shortages and hiring booms, and other sectors (such as mortgage lending in 2022 and 2023 and some corners of tech) having experienced substantial payroll reductions. Where Are the Jobs? Winners and Losers by Industry.

In addition, the federal government has shed 328,000 workers since January 2025, and state governments (mostly higher education) have shed 53,000 workers since January 2025.

Laid-off staff who receive severance packages, such as continued salaries for x number of months, cannot file for unemployment benefits since they’re still getting paid by their former employer. Many of them find new jobs within the severance period, collect severance plus the salary at the new job, and so they cannot claim unemployment benefits and don’t show up on the unemployment rolls.

But people who could not find a new job within the severance period are eligible to file for unemployment benefits when the severance expires. Their initial applications for unemployment benefits show up here in the data.

Laid-off H-1B visa holders are generally not eligible to file for unemployment insurance benefits and don’t show up in the data here.

What we’re seeing here is that the crackdown on illegal immigration and on abuses of legal immigration rules has changed the labor market by reducing the supply of labor over the past 18 months, and confirms what the separate data in the monthly employment report has also shown from a different angle.

This declining labor force has kept the labor market relatively tight.

Normally, that combination of big job losses at the federal and state governments, and lethargic payroll increases in the private sector, amid a normally growing labor force, would have led to surging claims for unemployment insurance, and by extension surging unemployment rates (data in the jobs report, the next one tomorrow).

The fact that this hasn’t happened shows the impact of the crackdown on illegal immigration which has caused the labor force to decline this year.

Continued weekly claims for unemployment insurance benefits reflect the total number of people who’d initially applied for unemployment insurance at least a week earlier and who still haven’t found a job and are still claiming unemployment benefits.

Continued claims ticked up to 1.72 million in the latest reporting week, with the four-week average at 1.71 million. The only periods since the 1960s when continued claims were lower were some weeks in 2018-2019 and during the labor shortages after Covid.

This measure reflects how long it takes overall for laid-off people to get a new job after claiming unemployment insurance. When it takes longer overall for them to find a new job and they spend more time on the unemployment insurance rolls, these continued claims rise, and they did that coming out of the labor shortages – but remained historically low.

For the past 12 months, the trend has turned the other way, with people spending less time unemployed before they find a new job, and the number of continued claims has declined since late 2025.

The purple columns indicate recessions and what happens before and during them:

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