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New claims for unemployment benefits in the United States rose moderately last week, showing no sign of deterioration in the labor market, which could allow the Federal Reserve to keep interest rates unchanged as it monitors the economic fallout from the war with Iran. Initial claims for unemployment benefits rose by 16,000 to reach 219,000 in seasonally adjusted data for the week ending April 4, the Labor Department announced on Thursday. Economists surveyed by Reuters had forecasted 210,000 claims for the past week. The low level of layoffs anchors the labor market, and there is currently no indication that employers have reacted to the oil shock caused by the war between the United States, Israel, and Iran by reducing their workforce. President Donald Trump announced a two-week ceasefire on the condition that Tehran reopens the Strait of Hormuz. The surge in global oil prices has pushed the average retail price of gasoline to over $4 per gallon for the first time in over three years, wiping out around $3.2 trillion from the stock market in March.
Economists expect a rise in inflation in March, with the consumer price index expected to increase by 1.0% on a monthly basis, corresponding to a 3.3% increase on an annual basis. The Federal Reserve’s target is 2%. The minutes of the Fed’s general policy meeting on March 17 and 18, released on Wednesday, showed that a growing group of policymakers last month believed that rate hikes might be necessary to counter inflation.
The Fed has maintained its benchmark interest rate range at 3.50% to 3.75%. The likelihood of a rate cut this year has sharply decreased. Most policymakers “expected the unemployment rate to remain unchanged and for net job creation and labor force growth to remain weak, while a few participants (in the meeting) expected labor market conditions to ease,” according to the minutes.
The labor market remains stuck in what economists call a state of “weak hiring, weak fire,” which they attribute to the uncertainty arising from import tariffs and massive deportations by Donald Trump. Although nonfarm payrolls rebounded by 178,000 jobs in March, the median unemployment duration, at 11.4 weeks, is the longest in over 4 and a half years. The number of people receiving unemployment benefits after the first week of assistance, an indicator of hiring, decreased by 38,000 to reach 1.794 million in seasonally adjusted data for the week ending March 28, according to the claims report.
Although continuous claims have decreased compared to the elevated levels of last year, this is likely due to people exhausting their benefits, which are limited to 26 weeks in most states. Some young unemployed adults, who generally have little or no professional background, do not have the right to apply for unemployment benefits. They are the most affected by labor market sluggishness.
