The number of Americans filing new applications for unemployment benefits rose to a four-month high last week, signaling growing caution among employers as the economic fallout from the Iran war continues to weigh on business sentiment.
According to the US Labor Department, increased by 13,000 to 225,000 for the week ended May 30, the . Economists surveyed by FactSet had expected 211,000 claims, according to AP.
Claims rise but layoffs remain historically low
Despite the increase, layoffs remain relatively subdued by historical standards, suggesting that the US labor market is still holding up amid mounting economic uncertainty.
Weekly unemployment claims are widely viewed as a real-time indicator of layoffs and labor market health. Economists say, according to AP, the market remains in a “low-hire, low-fire” environment, where employers are reluctant to both hire and dismiss workers.
The unemployment rate currently stands at 4.3%, but job seekers continue to face challenges finding new positions as hiring activity slows.
Iran war adds pressure on economy
The rise in claims comes as the has injected fresh uncertainty into the US economy.
The closure of the , a key global oil transit route, has triggered a sharp . have climbed roughly 50% since the conflict began in late February, while average US gasoline prices have risen to $4.24 per gallon from below $3 earlier this year.
Higher fuel costs are increasing pressure on consumers and businesses alike, prompting some employers to delay hiring decisions.
Inflation remains elevated
Recent government data showed consumer inflation rose 3.8% year-on-year in April, marking its largest increase in three years. Wholesale prices also jumped 6% from a year earlier, reaching their highest level in more than three years.
Economists warn that the full impact of rising energy costs may not yet be reflected in food and consumer prices.
Persistent inflation remains well above the Federal Reserve’s 2% target, limiting policymakers’ ability to support growth through interest-rate cuts.
Fed likely to stay cautious
The , citing elevated inflation and uncertainty linked to Middle East tensions.
Some Fed officials have even suggested that further rate increases could be considered if inflationary pressures intensify.
Higher borrowing costs continue to weigh on business investment and hiring plans.
Hiring slows as layoffs remain contained
While employers added a stronger-than-expected 115,000 jobs in April, hiring momentum has weakened compared with previous years.
Weekly jobless claims have generally remained between 200,000 and 250,000 since the pandemic recovery, but hiring has slowed amid high interest rates, tariff-related uncertainty and broader economic headwinds.
Several major companies, including Verizon, UPS, , , Starbucks and Walmart, have announced job cuts in recent months.
The Labor Department also reported that the four-week moving average of claims, which smooths weekly fluctuations, rose by 6,500 to 214,750.
Meanwhile, continuing claims — the total number of Americans receiving unemployment benefits — fell by 8,000 to 1.78 million in the week ended May 23.
Investors and policymakers will now turn their attention to the government’s May employment report due on Friday for further clues on the strength of the US labor market.
(With AP inputs)
