The number of Americans filing initial claims for unemployment benefits increased last week, pointing to continued challenges in the job market as the year comes to a close.

According to the latest data from the Labor Department, new state unemployment benefit claims saw a rise of 12,000 in the past week, bringing the total to 218,000. This uptick surprised economists, who, according to a Reuters poll, had expected a more modest increase to 210,000 initial claims for the week ending December 23.

The number of individuals receiving benefits after one week of aid also saw an increase, climbing by 14,000 from the previous week and reaching a total of 1.875 million. This rise in continued unemployment claims, a key metric for assessing hiring trends, has been persistent since mid-September, suggesting that individuals already out of work may be facing difficulties securing new employment opportunities.

Despite the challenges, the economy did see some positive developments in November. The Labor Department’s non-farm payrolls report revealed the addition of 199,000 new jobs, a notable improvement from the 150,000 reported in October. Additionally, the unemployment rate experienced a modest decline from the previous month, dropping to 3.7% from 3.9%.

However, the Federal Reserve remains cautious in its approach, considering the backdrop of slower job growth and relatively mild inflation. The central bank has maintained its benchmark interest rate unchanged for three consecutive policy meetings, and economists widely anticipate that the rate hike campaign may be coming to an end.

Since March 2022, the Federal Reserve has raised its policy rate by 525 basis points, bringing it to the current range of 5.25%-5.50%, as part of an effort to curb inflation. As the year concludes, attention will be closely focused on how policymakers navigate the balance between fostering economic recovery and addressing lingering labor market challenges.