Jobs stall and prices surge amid Trump’s Iran-fueled economic turmoil

Applications for unemployment benefits in the U.S. saw a slight dip last week, signaling continued low layoff rates even as a confluence of economic uncertainties, including Trump’s ongoing war in Iran, cast a shadow over the nation's financial outlook.

The Labor Department reported Thursday that new claims for jobless aid for the week ending May 16 fell by 3,000 to 209,000. This figure was lower than the 213,000 new applications analysts surveyed by FactSet had anticipated, suggesting a tighter labor market than some forecasts.

Weekly filings for unemployment benefits are widely regarded as a real-time barometer for U.S. layoffs and the overall health of the job market.

Despite these historically low layoff figures, the labor market appears to be in a peculiar "low-hire, low-fire" state, according to economists.

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While this has kept the national unemployment rate at a low 4.3%, it has simultaneously made it challenging for those out of work to secure new employment.

A surprising 115,000 new jobs were added by U.S. employers in April, yet the ongoing war in Iran has introduced significant instability into the broader U.S. economy and labor market.

The closure of the Strait of Hormuz, a critical chokepoint for one-fifth of the world’s oil supply, has contributed to a more than 50% spike in oil prices since the war began in late February. Consequently, the average price for a gallon of gas in the U.S. has surged, impacting consumer spending and potentially deterring businesses from hiring.

This inflationary pressure is further evidenced by recent government data. Last week, it was revealed that consumer-level inflation rose 3.8% from April 2025, marking the largest jump in three years.

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Food prices are also on an upward trajectory, though analysts suggest these increases may not yet fully reflect the rising energy costs stemming from the conflict in Iran.

Another report indicated that wholesale prices climbed 6% year-over-year, reaching their highest point in over three years, with the Labor Department’s producer price index — a precursor to consumer inflation — jumping 1.4% from March to April, the largest monthly gain in over four years.

These figures place U.S. inflation well above the Federal Reserve’s 2% target. At its most recent meeting, the Fed opted to maintain its benchmark interest rate, citing economic uncertainty fueled by Middle East instability and persistent inflation.

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While lower interest rates typically stimulate economic growth and hiring, they also risk exacerbating inflation, leading some Federal Reserve policymakers to consider another interest rate hike this year.

Adding to the complexity, the burgeoning artificial intelligence boom and the substantial investment required for its development could potentially reshape or even displace certain job roles. This comes amidst recent job cuts by several prominent companies, including Verizon, UPS, Amazon, Disney, and Walmart.

Weekly jobless aid applications have largely stabilized between 200,000 and 250,000 since the U.S. economy emerged from the pandemic recession.

However, the pace of hiring began to decelerate approximately two years ago and tapered further in 2025, influenced by Trump’s erratic tariff rollouts, his administration's purge of the federal workforce, and the lingering effects of high interest rates intended to control inflation.

According to FactSet, employers added fewer than 200,000 jobs last year, a significant drop compared to about 1.5 million in 2024.

The Labor Department’s report also noted that the four-week moving average of jobless claims, which smooths out weekly fluctuations, edged down by 1,500 to 202,500. Meanwhile, the total number of Americans continuing to file for unemployment benefits for the previous week ending May 9 increased by 6,000, reaching 1.78 million.

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