By Lucia Mutikani
WASHINGTON, March 19 (Reuters) – The number of Americans filing new applications for unemployment benefits unexpectedly fell last week, pointing to stable labor market conditions and a rebound in job growth in March.
The weekly jobless claims report from the Labor Department on Thursday, the most timely data on the economy’s health, showed no impact yet on the jobs market from the dragging war in the Middle East, which has sent global oil and domestic gasoline prices soaring. Economists have warned that higher energy prices and tightening financial conditions could undermine consumer and business spending and be a drag on the labor market.
Federal Reserve Chair Jerome Powell on Wednesday described the labor market as being in “a sort of zero employment growth equilibrium,” adding that “does have a feel of downside risk, and it’s not kind of a really comfortable balance.”
The Federal Reserve kept its benchmark overnight interest rate in the 3.50%-3.75% range, with policymakers projecting higher inflation, a steady unemployment rate and only a single rate cut this year.
“Producers are unlikely to fire staff while there is a strong chance the jump in prices is temporary,” said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. “But elevated uncertainty, the recent tightening of financial conditions and high borrowing costs for small businesses will continue to weigh on hiring.”
Initial claims for state unemployment benefits dropped 8,000 to a seasonally adjusted 205,000 for the week ended March 14, the Labor Department said on Thursday. Economists polled by Reuters had forecast 215,000 claims for the latest week.
The government introduced new seasonal factors for 2026 and revised the seasonal factors from 2021 through 2025. Seasonal factors are the model used to strip out seasonal fluctuations from the series. Claims data was revised from 2021 through 2025. The revisions showed the spikes in claims in September and December last year were not as sharp as initially reported.
Layoffs have remained relatively low even as businesses have been reluctant to increase headcount because of what economists said was uncertainty caused by President Donald Trump’s sweeping tariffs. The Trump administration’s immigration crackdown, which reduced labor supply, had also hampered job growth, they said.
The U.S. Supreme Court struck down the duties, pursued under a law meant for use in national emergencies, but Trump has imposed a 10% global tariff, which he said would rise to 15%. Investigations have been launched against some trade partners, which economists said would result in more tariffs.
The U.S.-Israeli war on Iran has boosted oil prices by more than 40% since the conflict started at the end of February. Retail gasoline prices have jumped by more than 90 cents a gallon, data from motorist advocacy group AAA showed.
REBOUND IN JOB GROWTH IS EXPECTED
Economists said higher oil prices were likely to bleed into other segments of the economy, including air travel and road trucking, raise the costs of airline fares and groceries, and force households to cut back on spending. The conflict is also causing stock market volatility, which can lead to reduced spending by higher-income households, they said.
Higher-income households have been the key drivers of the economy, through increased consumer spending. Lower-income consumers would be disproportionately impacted by the higher inflation resulting from the conflict, economists said.
Stocks on Wall Street were trading lower on mounting inflation fears. The dollar fell against a basket of currencies as the European Central Bank and Bank of Japan kept rates steady. U.S. Treasury yields rose, though they pulled off from earlier highs.
The claims data covered the period during which the government surveyed businesses for the nonfarm payrolls component of March’s employment report. The four-week moving average of claims fell between the February and March payrolls survey period. Payrolls decreased by 92,000 jobs in February, the sixth decline since January 2025 and the second largest.
Harsh winter weather, a strike by healthcare workers and payback following outsized payroll gains in January accounted for part of the decline. The weather drag likely faded in March and healthcare employees have returned to work, which should underpin job growth this month.
Nonetheless, job growth has virtually stalled, causing many of those out of work, including recent college graduates, to experience long spells of unemployment. The number of people receiving unemployment benefits after an initial week of aid, a proxy for hiring, increased 10,000 to a seasonally adjusted 1.857 million during the week ended March 7, the claims report showed.
The so-called continuing claims are hovering at a lower level in part as some people exhaust their eligibility for benefits, limited to 26 weeks in most states. The unemployment rate increased to 4.4% in February from 4.3% in January.
“For all of the president’s populist bluster, the economy has shed 238,000 blue-collar jobs in manufacturing, mining and construction over the last year,” said Andrew Stettner, senior director for economic security at the National Employment Law Project. “If last year’s trend continues, we can expect that 40 percent of today’s unemployed won’t find jobs before their benefits run out–a rate that is up from 30 percent three years ago.”
Snowstorms and frigid temperatures likely weighed down on new homes sales in January, which tumbled 17.6% to a seasonally adjusted annualized rate of 587,000 units, the lowest level since October 2022, other data from the Commerce Department’s Census Bureau showed.
New home sales plunged 11.3% on a year-over-year basis in January. The decline was despite a decrease in mortgage rates at the start of the year after Trump ordered government-backed mortgage firms Fannie Mae and Freddie Mac to expand purchases of mortgage-backed securities.
Mortgage rates have, however, increased amid the war. That could limit any rebound in new home sales and put a damper on the spring selling season.
“Looking through likely weather effects, we expect housing activity to remain weak throughout the year as mortgage rates have not declined substantially and home prices remain elevated,” said Veronica Clark, an economist at Citigroup.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama, Andrea Ricci and Aurora Ellis)
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