Jobless claims fell again last week, with new filings dropping to 226,000 and adding to months of low layoffs.
The Fed will watch this data closely as it weighs its next move on rates, with markets already split on how fast policymakers will go. [NEEDS MANUAL VERIFICATION - recent Fed projections suggest a hike bias rather than further cuts]
Initial jobless claims - the number of people filing for unemployment for the first time - came in at 226,000, down from 230,000 the week before and just above the 225,000 economists had expected.
The four-week moving average, which smooths out the weekly noise, rose to 223,250, but the trend remains near its lowest in years.
It's a small number on its own, but week after week it tells the same story: companies aren't cutting jobs in any real way.
That steady backdrop has been a quiet support under the stock market this year, since fewer layoffs mean steadier shopping and stronger company profits.
Companies that rely on shoppers - retail, travel, and restaurants - have leaned on that trend all year, even as other parts of the economy slowed.
That kind of run has historically tracked with steady job growth, though it's shifted quickly in past cycles when other parts of the economy started to crack.
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There's another side to this report, and it's the part the Fed is watching most.
Continuing claims - the number of people still drawing unemployment week after week - rose 24,000 to 1.81 million, the highest in nearly three months, meaning people who lose their jobs are taking longer to find new ones.
So the job market isn't breaking - it's just getting harder to get back in once you're out.
That mix of low layoffs and slow hiring is exactly what the Fed has been hoping for: a slowdown without a crash.
It also makes the rate path messier, since there's no clear emergency forcing the Fed's hand.
The catch: if continuing claims keep climbing, the soft-landing story the market is currently pricing in starts to wobble.
The next monthly jobs report is the bigger signal, since weekly claims numbers swing around a lot from one week to the next.
That monthly print shows actual hiring data, which is what the Fed leans on most when setting rates.
While the Fed waits on that print, markets will also be tracking whether continuing claims keep climbing - if they do, traders may start repricing the rate path even without a clear break in the layoff data.
On top of that, job openings data - released separately by the Labor Department - will fill in the other half of the picture, showing whether employers are still posting roles even if they're hiring more slowly.
Either way, the Fed will see two more of these weekly prints before its next meeting.
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