Claims Drop to 199,000, But It’s Seasonal Smoke: December 31 Release Masks a 116,047 Jump in Continued Claims

The official press release dated December 31, 2025, flashes a clean 199,000 on initial jobless claims. Strong, right? Not so fast. Under the hood, unadjusted claims actually rose, and all-program continued claims jumped by 116,047. The headline strength is largely the product of seasonal math, not a genuine improvement in labor-market churn.

Here’s what the data reveals:

• Seasonally adjusted initial claims fell to 199,000 (-16,000), but unadjusted claims rose +5,333 (+2.0%) to 269,953. Seasonal factors expected a much bigger rise of +26,612 (+10.1%), mechanically pulling the adjusted number down.

• The 4-week moving average for initial claims climbed to 218,750 (+1,750), underscoring holiday distortions rather than a trend change.

• Revisions sharpened the contrasts: the prior week’s initial claims were revised up +1,000 (214,000 to 215,000), while the insured unemployment rate was revised down -0.1 (1.3% to 1.2%), and insured unemployment fell -10,000 (1,923,000 to 1,913,000).

• Seasonally adjusted insured unemployment decreased by 47,000 to 1,866,000, with the insured rate steady at 1.2%—a steadiness helped by that prior-week rate revision down to 1.2%.

• Continued weeks claimed across all programs surged +116,047 to 2,021,951 (week ending December 13), including increases in Workshare, federal civilian, and veterans programs.

Headline vs. Underlying: A Side-by-Side

Seasonal Alchemy: The 199,000 That Wasn’t

The headline reads strength; the raw data says “seasonal adjustment did the heavy lifting.” Unadjusted initial claims rose +5,333 to 269,953, far below the +26,612 increase the seasonal model anticipated. When actuals rise less than expected in a holiday week, the seasonal filter converts it into a drop—hence 199,000.

Meanwhile, the 4-week moving average—our best antidote to holiday noise—ticked up to 218,750 (+1,750). The week-to-week plunge masquerades as improvement, but the trend measure disagrees. December’s prints tell the story: 237,000 (Dec 6) → 224,000 (Dec 13) → 215,000 (Dec 20) → 199,000 (Dec 27). Directionally down, yes, but the average says “volatile, not stable.”

Revisions: The Quiet Story Shaper

Two small revisions changed the optics meaningfully:

• Initial claims prior week revised up +1,000 (214,000 → 215,000), making the current drop look bigger.

• Insured unemployment rate revised down -0.1 (1.3% → 1.2%), improving the rate narrative even as insured unemployment was revised down -10,000 (1,923,000 → 1,913,000). The 4-week insured average fell -2,500 (1,893,750 → 1,891,250).

This isn’t a one-off. The September 20, 2025 release also nudged the prior week up by +1,000, mirroring the pattern. The lesson: weekly headlines ride on small adjustments; the signal is in the averages and the all-program flows.

Continuing Claims: Pressure Building Offstage

The headline focuses on initial claims. The more consequential signal right now is in continuing benefits—particularly across all programs.

• Total continued weeks across all programs rose +116,047 to 2,021,951 (week ending December 13), outpacing the same week in 2024 (1,974,874).

• Components moved higher: Workshare/Short-Time Compensation +1,887 to 23,290, federal civilian +503 to 13,390, and newly discharged veterans +121 to 4,644.

Seasonally adjusted insured unemployment fell -47,000 to 1,866,000, and the insured rate held at 1.2%. But the unadjusted insured unemployment level is higher than a year ago (1,880,845 vs 1,859,372) even with the same 1.2% rate—a nuance that matters if you care about actual people on the rolls, not just rates.

Where Stress Lives: State-Level Red Patches

National aggregates obscure a clear dispersion. For the week ending December 27 (unadjusted), large increases hit:

• New Jersey (+6,807), Pennsylvania (+5,343), Michigan (+4,808), Missouri (+2,317), Ohio (+2,137), Oregon (+1,572), Rhode Island (+1,277), Tennessee (+1,473), Connecticut (+3,618), Kentucky (+1,834), Wisconsin (+1,130), Iowa (+1,149).

These were offset by outsized declines in California (-6,230), Texas (-8,200), and Florida (-2,165), pulling national totals lower. Translation: the “strength” story is regional, not broad-based. For investors, that argues for selectivity in regional bank exposure, state-sensitive muni credit, and consumer cyclicals with heavy Midwest/Northeast footprints.

December’s Whiplash—and the 2025 Pattern

December is always noisy. This one especially:

• Claims churned from 237,000 (Dec 6) → 224,000 → 215,000 → 199,000 even as the 4-week average rose to 218,750 from a revised 217,000.

• Seasonally adjusted insured unemployment moved 1,885,000 (Dec 6) → 1,913,000 (Dec 13) → 1,866,000 (Dec 20) with the insured rate steady at 1.2% throughout December (and 1.2% on Nov 29).

Zooming out, 2025 claims have oscillated in a narrow band with holiday dips and snap-backs. Late summer/early fall lived in the 220,000s, with a 264,000 peak on September 6 (insured rate 1.3%). Thanksgiving printed 192,000 before rebounding to 237,000 the week after, and now 199,000 into year-end—another holiday artifact confirmed by the unadjusted data.

What This Means for Markets

• Treasuries: The 199,000 headline is softer than it looks. With the 4-week average rising and all-program continued claims up 116,047, bonds should fade any knee-jerk “labor is reaccelerating” narrative. Risk skews to a modest bull-flattening if continued-claims pressure persists into January.

• Equities: Consumer-exposed cyclicals may cheer the headline, but the undercurrents—higher all-program rolls, regional stress—argue for caution in mid-cap retail and discretionary. Prefer quality balance sheets within staffing, logistics, and travel-sensitive names where diesel/jet pass-throughs remain manageable.

• Credit: The dispersion suggests a wider distribution of outcomes. Watch Midwest/Northeast consumer leverage and regional banks’ delinquencies; Workshare uptake rising to 23,290 can signal firms smoothing hours before layoffs—often a lead indicator for spread widening.

• Policy: The Fed will not chase a holiday-adjusted headline. With the insured rate steady and mixed breadth under the surface, this report doesn’t move the policy needle alone. The committee will look through December noise to January and revisions.

Positioning and What to Watch

• Favor duration on dips; the claims “improvement” is cosmetic. A sustained rise in all-program continued weeks above ~2.0 million would confirm softening.

• Tilt equity exposure toward defensives and quality—cash flow visibility over cyclicality—until the 4-week average turns lower and all-programs rolls stabilize.

• Hedge credit beta via higher-quality corporates; monitor state-level claims—especially NJ/PA/MI/CT—for deterioration that could spill into consumer and small-business credit.

• Key data checks: Next claims read on continued claims breadth, January payrolls follow-through, and any upward revisions to December’s insured unemployment.

The December 31 release can support a strength narrative if you stop at “199,000.” The fuller read says seasonal mechanics did the heavy lifting while continued claims—and specific states—quietly flashed caution. Trade the narrative if you must; invest with the numbers that didn’t make the headline.