New applications for U.S. unemployment benefits unexpectedly fell last week amid low layoffs, suggesting labor market conditions remained calm in March, though economists warned that a prolonged war in the Middle East posed a downside risk.
The month-long U.S.-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%. The national average retail gasoline 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 U.S. economist at Oxford Economics. “But the war’s impact on the labor market will take a bit more time to materialize.”
Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 202,000 for the week ended March 28, the Labor Department said on Thursday. 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” labor market. They have blamed the labor 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 labor 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 4.4% in March. The Bureau of Labor Statistics will release March’s employment report on Friday.
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. U.S. Treasury yields rose.
Imports Rebound In February
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 4.9% to $57.3 billion in February. Economists had forecast the trade gap increasing to $61.0 billion.
The two agencies are still catching up on data releases following last year’s government shutdown. The U.S. 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.
Economists expect shipping restrictions due to the war, which have affected goods ranging from energy products to fertilizers through the Strait of Hormuz, to reduce trade volumes.
Imports increased 4.3% to $372.1 billion in February. Goods imports rose 5.0% to $291.5 billion. They were boosted by imports of capital goods, which increased $7.8 billion, mostly reflecting computers, computer accessories and semiconductors.
These imports are likely linked to artificial intelligence and the construction of data centers. Imports of industrial supplies and materials increased $3.1 billion, lifted by crude oil. Consumer goods imports rose $2.2 billion amid a $1.0 billion increase in pharmaceutical preparations. Imports of automotive vehicles, parts and engines increased $1.6 billion.
Exports jumped 4.2% to a record high $314.8 billion. Goods exports soared 5.9% to an all-time high of $206.9 billion amid rises in nonmonetary gold, which is excluded from the calculation of gross domestic product growth, and natural gas. Non-petroleum goods exports hit a record high.
The goods trade deficit widened 3.0% to $84.6 billion. When adjusted for inflation, the goods deficit increased 0.6% to $83.5 billion, potentially keeping trade on track to remain a drag on economic growth in the first quarter.
The Atlanta Federal Reserve cut its first-quarter GDP growth estimate by 0.3 percentage point to a 1.6% annualized rate. Trade subtracted from GDP growth in the fourth quarter. The economy grew at a 0.7% pace during that period.
Exports of services rose $1.1 billion to a record $107.9 billion amid rises in travel, other business services, financial services and charges for the use of intellectual property. But exports of transport services fell. Imports of services jumped $1.3 billion to an all-time high of $80.6 billion, boosted by charges for the use of intellectual property.
“The effect of the ongoing oil disruption will likely be evident in the March trade data,” said Michael Gapen, chief economist at Morgan Stanley.​
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)
