The number of people applying for unemployment benefits fell sharply last week.

The Labor Department reported Thursday that jobless claims dropped to 196,000.

That is the lowest level since mid-July, and it is down from 206,000 the week before.

The four-week average smooths out weekly ups and downs, and it fell to 203,250.

Economists had expected 207,500 claims, according to a survey by the data firm FactSet.

Jobless claims are a proxy for layoffs.

Economists watch them for signs of where the job market is headed.

For the past year, claims have mostly stayed in a historically low range of 200,000 to 230,000 a week.

The American job market has stayed sturdy despite higher gasoline prices.

Those prices have squeezed businesses and consumers since the fighting with Iran began Feb. 28.

Layoffs are low because businesses remember the labor shortages after pandemic lockdowns.

They are reluctant to let go of staff, and they are hiring, though modestly by recent standards.

So far this year, employers have added an average of 80,000 jobs a month.

That includes a surprising 162,000 in August.

That is an improvement on a dismal 2025, when monthly job creation averaged 9,700.

High interest rates and President Donald Trump's ever-changing trade policies discouraged hiring that year.

Even so, the current pace remains well below the 166,000 monthly jobs created on average in 2023 and 2024.

It is also far below the 491,000 a month recorded during the 2021-2022 hiring boom.

That boom followed the COVID-19 lockdowns.