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Initial filings for unemployment claims fell last week to their lowest level in five months, a sign that the labor market is strengthening even as the Federal Reserve is trying to slow things down.

Jobless claims for the week ended Sept. 24 totaled 193,000, a decrease of 16,000 from the previous week’s downwardly revised total and below the 215,000 Dow Jones estimate, according to a Labor Department report Thursday.

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The drop in claims was the lowest level since April 23 and the first time claims fell below 200,000 since early May.

Continuing claims, which run a week behind, fell 29,000 to 1.347 million.

The strong labor numbers come amid Fed efforts to cool the economy and bring down inflation, which is running near its highest levels since the early 1980s. Central bank officials specifically have pointed to the tight labor market and its upward pressure on salaries as a target of the policy tightening.

Stocks plunged following the report while Treasury yields were higher.

“The recent decline in layoffs flies in the face of the Fed’s efforts to soften up labor market conditions and knock inflation back down toward its 2% target,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “The capital markets have heard the Fed, and investors are feeling the pain. But the jobs market? For now at least, it’s not listening.”

There was more bad news Thursday for the Fed on the inflation front.

The personal consumption expenditures price index, a favorite inflation gauge for the Fed, showed a 7.3% year-over-year price gain in the second quarter, the Commerce Department reported in its final GDP estimate for the period. That was above the 7.1% reading in the prior two Q2 estimates and just off the 7.5% gain in the first quarter.

Excluding food and energy, core PCE inflation was 4.7%, 0.3 percentage point higher than the previous two estimates but below the 5.6% jump in Q1.

The Fed has raised interest rates five times in 2022 for a total of 3 percentage points, and officials have stressed the importance of continuing to hike until inflation comes down closer to the central bank’s 2% target.

“We have to do what we must do to get back to price stability, because we can’t have a healthy economy, we can’t have good labor markets over time, unless we get back to price stability,” Cleveland Fed President Loretta Mester told CNBC’s “Squawk Box” in an interview Thursday morning.

However, the Cleveland Fed’s own Inflation Nowcasting gauge shows little improvement on the inflation front in September even with a sharp decline in gas prices. The gauge is indicating an 8.2% increase in the headline consumer price index and a 6.6% increase in core prices, compared with respective readings of 8.3% and 6.3% in August.

The BEA’s final estimate for Q2 GDP was a decline of 0.6%, unchanged from the previous estimate. That was the second straight quarter of negative GDP, meeting a commonly accepted definition of a recession.

Correction: The final estimate for Q2 GDP was a decline of 0.6%, unchanged from the previous estimate. An earlier version misstated its status.

The financial market turmoil resulting from the U.K. government’s spending plan “suggests incompetence,” according to billionaire investor Ray Dalio. 

“I can’t imagine that this is intended – and if it’s not intended then it’s an understanding question,” Dalio said on BBC Radio 4′s “Today” program Wednesday.

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His comments referred to the market turbulence that followed Finance Minister Kwasi Kwarteng’s fiscal announcements late last week. The measures included large swathes of unfunded tax cuts that have drawn global criticism, including from the International Monetary Fund.

The Bank of England on Wednesday stepped in to try to calm markets, saying it would purchase government bonds on a temporary basis to help “restore orderly market conditions.”

Dalio has joined a growing list of economists criticizing the measures proposed by Liz Truss’ administration.

The founder of Bridgewater, one of the world’s largest hedge funds, said it isn’t possible to make wealth by running large deficits because a country needs lenders willing to own that debt.

“It doesn’t stimulate the economy, productivity is what stimulates the economy over the long run,” Dalio said.

“I would think there would be an understanding of the mechanics of that by the government and that’s why it’s concerning,” Dalio said. 

Speaking via Twitter, Dalio said the panic selling driving the plunge in U.K. bonds, sterling and financial assets was “due to the recognition that the big supply of debt that will have to be sold by the government is much too much for the demand.”

“That makes people want to get out of the debt and currency. I can’t understand how those who were behind this move didn’t understand that. It suggests incompetence,” he added.

A Downing Street spokesperson was not immediately available to comment when contacted by CNBC.

The U.K. Treasury said Monday that the government would set out its medium-term fiscal plan on Nov. 23.

Jonathan Portes, professor of economics and public policy at King’s College London, told CNBC on Wednesday that the U.K. government’s spending plans put the country’s debt and deficit “on an unsustainable path.”

“It has rightly, I think, been regarded by economists across the political spectrum as unnecessary and damaging,” Portes told CNBC’s “Squawk Box Europe.”