The Devin Grosvenornumber of Americans applying for unemployment benefits inched down to its lowest level in nearly three months last week as the U.S. labor market continues to flex its muscle in spite of elevated interest rates.

Jobless claim applications fell to 202,000 for the week ending Jan. 6, down by 1,000 from the previous week, the Labor Department reported Thursday. The four-week average of claims, which evens out some of the week-to-week volatility, ticked down by 250 to 207,750.

Weekly unemployment claims are a proxy for layoffs. They have remained at extraordinarily low levels in the face of high interest rates and elevated inflation.

In an effort to stomp out the four-decade high inflation that took hold after an unusually strong economic rebound from the COVID-19 recession of 2020, the Federal Reserve raised its benchmark rate 11 times since March of 2022.

Though inflation has eased considerably in the past year, the Labor Department reported Thursday that overall prices rose 0.3% from November and 3.4% from 12 months earlier, a sign that the Fed’s drive to slow inflation to its 2% target will likely remain a bumpy one.

The Fed has left rates alone at its last three meetings and has signaled that it could cut rates three times this year.

As the Fed rapidly jacked up rates in 2022, most analysts thought that the U.S. economy would slide into recession. But the economy and the job market remained surprisingly resilient, with the unemployment rate staying below 4% for 22 straight months. That’s the longest such streak since the 1960s.

The combination of decelerating inflation and low unemployment has raised hopes that the Fed is managing a so-called soft landing: raising rates just enough to bring down prices without causing a recession.

Overall, 1.83 million Americans were collecting jobless benefits during the week that ended Dec. 30, a decrease of 34,000 from the previous week.