Initial claims for unemployment benefits fell sharply last week, offering reassurance that the U.S. labor market remains sturdier than expected despite widespread concerns of a slowdown.

For the week ending Sept. 20, first-time filings totaled a seasonally adjusted 218,000, down 14,000 from the previous week’s upwardly revised figure, the Labor Department reported Thursday. The number came in well below the Dow Jones estimate of 235,000. Continuing claims also edged lower, dipping by 2,000 to 1.926 million.

The data arrives just a week after the Federal Reserve lowered its benchmark interest rate by 25 basis points to 4%-4.25%, its first cut of 2025, citing rising downside risks to employment. While payrolls growth has slowed and job openings sit at multiyear lows, the claims figures suggest companies are still holding on to workers.

Some volatility remains, particularly in Texas, which saw filings swing significantly in recent weeks, though last week’s unadjusted numbers showed a 7,000 drop.

Beyond the labor market, Thursday’s data releases painted an unexpectedly strong picture of the broader U.S. economy:

• GDP Growth: Second-quarter GDP was revised up to 3.8%, half a percentage point higher than the prior estimate, thanks to stronger consumer spending.
• Consumer Spending: Personal consumption expenditures rose 2.5%, far above the earlier 1.6% estimate.
• Durable Goods: Orders for long-lasting items jumped 2.9% in August, defying forecasts for a decline. Even excluding transportation, durable goods rose 0.4%.
• Housing: New home sales surged 20.5% in August, the biggest monthly gain since January 2022, while existing home sales edged slightly above expectations.

Markets still expect the Fed to cut rates twice more this year, in October and December, even as Chair Jerome Powell noted Tuesday that the economy is “showing resilience in the midst of substantial changes in trade, immigration, fiscal, and geopolitical arenas.”

While policy remains “modestly restrictive,” Powell left the door open for more easing should conditions shift.