Applications for US unemployment benefits edged up to 200,000 last week but held near historically low levels, signaling that employers are reluctant to let go of workers despite economic uncertainty from the ongoing war in Iran.
"The labor market weakening we saw through 2025 seems to have stopped and may have even reversed somewhat," Dean Baker, senior economist at the Center for Economic and Policy Research, wrote in a commentary. "We are seeing a strange economy that is getting stranger because of the war."
The Labor Department report showed initial claims rose by 10,000 for the week ended May 2, slightly below the median economist forecast of 205,000. Continuing claims, a proxy for the number of people receiving benefits, were lower than expected, reinforcing the view of a tight labor market.
The data suggests the job market remains a pillar of strength for the US economy, even as concerns grow that rising gas prices could curb consumer spending. Investors are now looking to Friday's broader nonfarm payrolls report, which is forecast to show the economy added 55,000 jobs in April, for further clues on the Federal Reserve's policy path.
The relative stability in jobless claims, which have hovered near five-decade lows for months, contrasts with a series of high-profile layoff announcements in the tech and media sectors. However, those cuts have not translated into a broader wave of unemployment, with many displaced workers quickly finding new jobs. This underlying strength is a key factor for the Federal Reserve as it weighs its next move on interest rates. While inflation remains the primary concern, a resilient labor market gives the central bank more flexibility to maintain its current policy stance.
Economists are watching for signs of whether March's surprisingly strong 178,000 job gain was an anomaly or the start of a new trend. "After reassuring job gains in March, Friday’s report will be critical for determining whether those results were an anomaly or the beginning of a stronger trend for the labor market," said Michael Linden, a senior policy fellow at the Washington Center for Equitable Growth.
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