Shipping containers are shown stacked together on Terminal Island at the port of Los Angeles in February.Mike Blake/Reuters
New applications for U.S. unemployment benefits unexpectedly fell last week amid low layoffs, suggesting labour 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 per cent. The national average retail gasoline price this week topped US$4 a gallon for the first time in more than three years. Higher energy costs would slow consumer spending and increase costs for business, and further restrain hiring, economists warned. 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 labour 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” labour market. They have blamed the labour 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 labour 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 health care workers and harsh weather. The unemployment rate is forecast to have held steady at 4.4 per cent 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.
U.S. stocks opened lower. The dollar gained versus a basket of currencies. U.S. Treasury yields rose.
Imports rebound in February
Trade policy shifts continue to cause volatility impacting trade data. A separate report from the Commerce Department’s Bureau of Economic Analysis and Census Bureau showed the trade deficit widened 4.9 per cent to US$57.3-billion in February. Economists had forecast the trade deficit rising to US$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. Trump 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 per cent to US$372.1-billion in February. Goods imports rose 5.0 per cent to US$291.5-billion. They were boosted by imports of capital goods, which increased US$7.8-billion, mostly reflecting computers, computer accessories and semiconductors. These imports are likely linked to artificial intelligence and the construction of data centres.
Imports of industrial supplies and materials increased US$3.1-billion, mostly lifted by crude oil. Consumer goods imports rose US$2.2-billion amid a US$1.0-billion increase in pharmaceutical preparations. Imports of automotive vehicles, parts and engines increased US$1.6-billion.
Exports jumped 4.2 per cent to a record high US$314.8-billion. Goods exports soared 5.9 per cent to an all-time high of US$206.9-billion.
Exports of industrial supplies and materials increased US$10.2-billion to a record high amid rises in monetary gold and natural gas. Non-petroleum goods exports also hit a record high. The goods trade deficit widened 3.0 per cent to US$84.6-billion in February. When adjusted for inflation, the goods deficit increased US$0.5-billion, or 0.6 per cent, to US$83.5-billion, potentially keeping trade on track to remain a drag on economic growth in the first quarter.
Trade subtracted from gross domestic product growth in the fourth quarter. The Atlanta Federal Reserve is forecasting GDP increasing at a 1.9-per-cent annualized rate in the first quarter. The economy grew at a 0.7-per-cent pace in the fourth quarter.
Exports of services increased US$1.1-billion to a record US$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 US$1.3-billion to an all-time high of US$80.6-billion, boosted by charges for the use of intellectual property.