US jobless claims rise to 215,000, but layoffs remain near 'historic lows' despite Iran war uncertainty

More Americans filed for unemployment benefits last week, but the overall labor market continued to show stability and layoffs remained relatively low despite the uncertainty surrounding the Iran war, the AP reported.

Initial claims for unemployment benefits rose to 215,000 from 210,000 the previous week, according to the US Labor Department. The four-week moving average also rose by about 6,300 to 209,000, helping smooth out short-term swings in the data.

“Initial claims are still impressively low, near historic lows,” Carl Weinberg, chief economist at High Frequency Economics, wrote in a commentary. “The increase from last week to this week is trivial in a labor market of 159 million workers.”

The number of Americans filing for unemployment benefits — a key indicator of layoffs — has remained largely steady in the low range of about 200,000 to 250,000 a week since the U.S. economy recovered from a brief but severe pandemic recession in 2020.

The total number of people receiving unemployment benefits also rose by 15,000 to 1.79 million in the week ending May 16. This persistently low level of claims suggests that most employers in the United States are not significantly cutting jobs.

However, while layoffs remain limited, hiring activity is also weak. Employers, including companies, nonprofits and government agencies, added fewer than 10,000 jobs a month last year, marking the weakest pace of non-recessionary hiring since 2002.

Job creation has picked up a bit so far this year, averaging 76,000 a month from January to April. In contrast, employers added 122,000 a month in 2024 and averaged nearly 400,000 a month from 2021 to 2023 as the economy rebounded from the COVID-19 lockdown.

The United States now needs fewer new jobs to keep the unemployment rate from rising. This is due in part to factors such as stricter immigration policies under President Donald Trump and the continued retirement of baby boomers, both of which are reducing the rate of labor force growth. As a result, the monthly “breakeven” level of job creation needed to keep the unemployment rate stable can be as low as zero.

Despite the slower pace of hiring, the unemployment rate remained relatively low by historical standards at 4.3% in April, suggesting that overall labor market conditions remain stable despite subdued job growth.

As the AP reports, the Iran war has clouded the economic outlook as higher energy prices weigh on consumers and businesses. Iran responded to the US and Israeli attacks by turning to economic warfare – closing the Strait of Hormuz, through which a fifth of the world’s oil passes, and causing the largest disruption of global oil supplies in history. In response, U.S. gasoline prices climbed to an average of $4.43 a gallon on the eve of the conflict, from an average of $2.98 a gallon on the eve of the conflict, according to AAA.