NEW applications for US unemployment benefits unexpectedly fell last week amid low layoffs, suggesting labour market conditions remained calm in March, though economists warned that a prolonged war in the Middle East posed a downside risk.
The month-long US-Israeli war with Iran has added another layer of uncertainty for businesses, which were trying to navigate a forever-shifting trade policy. The war has sent global oil prices soaring more than 50 per cent. The national average retail petrol price this week topped $4 a gallon for the first time in more than three years. Higher energy costs and stock market selloff because of the conflict would slow consumer spending and raise costs for business, and further restrain hiring, economists warned.
About $3.2 trillion was erased from the stock market in March. President Donald Trump on Wednesday vowed more aggressive strikes on Iran.
“We expect weaker job growth and a higher unemployment rate for 2026 than we had been forecasting prior to the war,” said Nancy Vanden Houten, lead US economist at Oxford Economics. “But the war’s impact on the labour market will take a bit more time to materialise.”
Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 202,000 for the week ended March 28, the Labour Department said yesterday. Economists polled by Reuters had forecast 212,000 claims for the latest week.
Claims have moved in a 201,000-230,000 range this year, consistent with what economists describe as a “low-hire, low-fire” labour market. They have blamed the labour market stagnation on lingering uncertainty caused by Trump’s aggressive import tariffs. Growth in private nonfarm payrolls has averaged just 18,000 jobs per month in the three months through February.
Reduced labour supply because of the Trump administration’s hard-line immigration policy was also hampering job growth, economists said. The claims report has no bearing on the closely watched employment report for March as it falls outside the survey periods. Nonfarm payrolls likely rebounded by 60,000, a Reuters survey of economists showed.
Payrolls dropped by 92,000 jobs in February partly because of a strike by healthcare workers and harsh weather. The unemployment rate is forecast to have held steady at 4.4pc in March. The Bureau of Labour Statistics will release March’s employment report today.
Good Friday is not a federal holiday in the United States, though some financial markets are closed.
The number of people receiving unemployment benefits after an initial week of aid, a proxy for hiring, increased 25,000 to a seasonally adjusted 1.841 million during the week ended March 21, the claims report showed. The so-called continuing claims have declined from last year’s lofty levels. But people exhausting their eligibility for benefits, limited to 26 weeks in most states, could be holding the number down. BLS data this week showed a larger-than-expected drop in job openings in February and hiring falling to the lowest level in nearly six years.
Stocks on Wall Street were trading lower. The dollar gained versus a basket of currencies. US Treasury yields rose.
Volatility from tariff policy continues to impact trade data. A separate report from the Commerce Department’s Bureau of Economic Analysis and Census Bureau showed the trade deficit widened 4.9pc to $57.3 billion in February. Economists had forecast the trade gap increasing to $61.0bn.
The two agencies are still catching up on data releases following last year’s government shutdown. The US Supreme Court in February struck down Trump’s broad tariffs, which he pursued under a law meant for use in national emergencies. But Trump responded by imposing a global tariff for up to 150 days. He has defended the tariffs as necessary to address the trade deficit and revive the nation’s industrial base, though 100,000 factory jobs have been lost since January 2025.
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