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The number of Americans filing new applications for unemployment benefits fell to a two-month low last week, suggesting labor market conditions remained stable in April, though uncertainty around tariffs is making businesses hesitant to boost hiring.
President Donald Trump’s import duties are squeezing the housing market, with other data on Thursday showing single-family housing starts plunging to an eight-month low in March, which underscored economists’ expectations that economic growth likely ground to a halt in the first quarter.
Federal Reserve Chair Jerome Powell on Wednesday acknowledged the heightened uncertainty and signs the economy appeared to have slowed in the first quarter.
“The labor market remains resilient,” said Michael Pearce, deputy chief U.S. economist at Oxford Economics. “We are most concerned about small businesses, which are responsible for a large share of total employment and job creation and are less able to withstand gyrations and uncertainty in tariff policy.”
Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 215,000 for the week ended April 12, the lowest level since February, the Labor Department said.
Economists polled by Reuters had forecast 225,000 claims for the latest week. There are still no signs mass firings of federal government workers have significantly impacted the labor market.
The data suggested companies had not yet responded with layoffs to Trump’s April 2 “Liberation Day” tariff announcement, but the White House’s trade policy has constantly shifted, which economists said made it difficult for businesses to plan ahead.
Trump has slapped duties on virtually all foreign goods, igniting a trade war with China, the biggest source of U.S. imports. The hit from tariffs, together with the drag from tightening financial conditions, could still come.
Businesses appear to be cutting hours rather than lay off workers. A separate report from the Philadelphia Fed showed the average workweek at factories in the mid-Atlantic region contracted sharply in April and a measure of future manufacturing employment dropped to the lowest level since 2016.
The tariffs, viewed by Trump as a tool to raise revenue to offset his promised tax cuts and to revive a long-declining U.S. industrial base, have stoked fears of high inflation and stagnation in economic growth.
Low layoffs have anchored the labor market. With business sentiment in the doldrums, economists are bracing for a rise in unemployment in the coming months. The claims data covered the period during which the government surveyed businesses for the nonfarm payrolls component of April’s employment report.
Claims declined during the March and April survey weeks, suggesting a steady pace of job gains this month. The economy added 228,000 jobs in March while the unemployment rate rose to 4.2% from 4.1% in February.
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Next week’s data on the number of people receiving benefits after an initial week of aid, a proxy for hiring, could shed more light on the labor market’s fortunes in April.
The so-called continuing claims increased 41,000 to a seasonally adjusted 1.885 million during the week ending April 5, the claims report showed, indicating some laid-off workers were finding it difficult to land new opportunities.
Stocks on Wall Street fell as tariffs continued to weigh on investor sentiment. The dollar was steady against a basket of currencies. U.S. Treasury yields were mixed.
Chaotic Tariff Policy
A third report from the Commerce Department’s Census Bureau showed single-family housing starts, which account for the bulk of homebuilding, dropped 14.2% to a seasonally adjusted annual rate of 940,000 units in March, the lowest level since July.
They decreased 9.7% year-on-year. Weak homebuilding added to economists’ expectations that gross domestic product growth slowed to below a 0.5% annualized rate in the first quarter, with greater odds for a contraction.
A surge in imports as businesses front-loaded goods to avoid tariffs accounts for some of the anticipated stall in growth. The economy grew at a 2.4% pace in the fourth quarter.
A National Association of Home Builders survey on Wednesday showed sentiment among single-family homebuilders remained depressed in April. The NAHB said the impact of import duties was already being felt with “the majority of builders reporting cost increases on building materials due to tariffs.”
It said suppliers have on average raised their prices by 6.3%, meaning that builders estimated a typical cost effect from recent tariff actions at $10,900 per home. These increased costs have overshadowed a recent moderation in mortgage rates, driven by concerns over the economy’s outlook.
There is also little incentive for builders to continue breaking ground on housing projects, with new housing inventory at levels last seen in late 2007.
“Even before all of the tariff news, housing demand was tepid and new home inventories were bloated,” said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets. “Thus, it would be far from shocking to see housing starts decline. Add to that the uncertainty regarding the economic outlook created by the chaotic tariff policies.”
Permits for future construction of single-family housing fell 2.0% to a rate of 978,000 units in March.
Starts for housing projects with five units or more were unchanged at a rate of 371,000 units.
Overall housing starts tumbled 11.4% to a rate of 1.324 million units. Economists polled by Reuters had forecast housing starts falling to a rate of 1.420 million units.
Multi-family building permits jumped 10.1% to a rate of 445,000 units. That lifted overall building permits by 1.6% to a pace of 1.482 million units last month.
The number of single-family houses approved for construction that were yet to be started surged 6.5% to 148,000 units, the highest level in nearly three years.
The completions rate for that housing segment rose 0.9% to 1.029 million. The inventory of single-family housing under construction dropped 1.6% to a rate of 632,000 units, the lowest level since February 2021.
“A significant decline in new residential construction projects looks likely to add to the broader headwinds facing the economy over the next quarter or two,” said Oliver Allen, senior U.S. economist at Pantheon Macroeconomics.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)
