The latest weekly unemployment claims report from the Labor Department shows initial claims dropped by 18,000 to 215,000 last week. That’s the lowest numbers since the turn of the new year. The four-week average for claims, which compensates for weekly volatility, fell by 6,000 to 230,500.

While Thursday’s Labor Department report indicates a low number of layoffs, it doesn’t appear there is much hiring happening either. According to the Institute for Supply Management’s Report on Business for February, the services industry activity slowed for a third straight month in February. A measure of employment in the sector contracting for the first time since June 2021.

“Respondents continue to be impacted by supply chain disruptions, capacity constraints, inflation, logistical challenges and labor shortages,” the report said. “These conditions have affected the ability of panelists’ businesses to meet demand, leading to a cooling in business activity and economic growth.”

Thursday’s numbers on unemployment claims come a day before February’s jobs report is expected to be released. Analysts surveyed by the financial data firm FactSet forecast that the U.S. economy added 400,000 jobs last month. That would be a drop from the 467,000 jobs added in January. However it would be higher than the average number of jobs added in November and December.

Federal Reserve Chair Jerome Powell addressed unemployment while testifying in front of the Senate Banking Committee Thursday. He said “this is a great labor market for workers,” and noted that “the problem really that we’re facing is one of high inflation.” Powell said this inflation has been made worse by Russia’s invasion of Ukraine.

“I think we what we know so far is that commodity prices have moved up significantly. Energy prices, in particular, that’s going to work its way through our U.S. economy,” Powell said. “We’re going to see upward pressure on inflation, at least for a while. We don’t know how long that will be sustained for.”

Powell’s comments came a day after he told the House Financial Services Committee he’s “inclined to propose and support” a quarter-point increase in the Fed’s benchmark short-term interest rate at a Fed meeting later this month.

“I also expect that at this meeting, we’ll make good progress toward an agreement on a plan to shrink the balance sheet,” Powell said. “We will not finalize that plan at this meeting. We’ll do that when we think the time is right at a coming meeting.”