New applications for unemployment benefits fell far below expectations last week, showing that layoffs remain historically low even as higher oil prices, cautious hiring and the Iran war create new risks for the U.S. economy.
By yourNEWS Media Newsroom
The number of Americans seeking unemployment benefits fell to its lowest level in nearly 57 years last week, offering a strong sign that employers remain reluctant to cut workers despite rising energy costs and continued global economic uncertainty.
Initial applications for jobless aid declined by 22,000 to 187,000 during the week ending July 18, the Labor Department reported Thursday. That was the smallest weekly total since the week ending Sept. 6, 1969, and considerably lower than the 215,000 applications forecast by economists surveyed by FactSet.
Weekly unemployment claims are widely viewed as a near-real-time measure of layoffs and an important indicator of labor-market strength. Although individual weeks can be volatile, the latest figure points to a job market in which dismissals remain unusually limited even as businesses face higher operating costs and uncertainty tied to the war with Iran.
“The economic crisis caused by the energy supply shock is not over yet,” said Carl Weinberg, chief economist at High Frequency Trading. “But the labor market has yet to show any sign of wear and tear from the surge in oil prices.”
The decline in claims came as U.S. crude prices rose nearly 5% early Thursday to more than $91 per barrel, their highest level in roughly six weeks. The national average price of gasoline also climbed back above $4 per gallon, increasing pressure on household budgets and raising costs for transportation, manufacturing, shipping and other fuel-dependent industries.
A prolonged conflict and persistently elevated energy prices could eventually force employers to reduce spending, delay expansion or cut payrolls. For now, however, the layoffs data show little evidence that those pressures have translated into widespread job losses.
The strong claims report contrasts with a more cautious picture of hiring. Employers added only 57,000 jobs in June, less than half the total recorded in May, indicating that many companies remain hesitant to expand their workforces. The unemployment rate declined from 4.3% in May to 4.2% in June, but much of that drop occurred because some unemployed people stopped looking for work and were no longer counted in the official labor force.
June’s modest hiring followed stronger employment gains during the previous three months, which had helped ease fears that the Iran conflict might quickly derail an already uneven labor market. The latest jobless claims suggest that while companies may be slowing recruitment, most are still holding on to the employees they already have.
Since the economy emerged from the pandemic recession, weekly claims have generally remained between 200,000 and 250,000. The latest reading fell well below that range, reinforcing the view that layoffs remain low by historical standards.
Several major companies have announced workforce reductions in recent months, including Verizon, UPS, Amazon, Disney, Starbucks and Walmart. Microsoft also said earlier this month that it would eliminate 4,800 positions, equal to approximately 2.1% of its worldwide workforce, with many of the cuts affecting its Xbox video game operations.
Those announcements have not yet produced a broader rise in unemployment filings. The four-week moving average of new claims, which smooths out week-to-week fluctuations, fell by 7,250 to 207,500.
Continuing claims also remained subdued. The total number of Americans receiving unemployment benefits during the week ending July 11 declined by 2,000 to just under 1.8 million, another figure consistent with a labor market that remains comparatively healthy.
The combination of historically low layoffs and restrained hiring suggests that employers are adopting a cautious holding pattern. Companies are limiting new additions to payrolls while avoiding large-scale dismissals, leaving the labor market stable but less dynamic than during periods of stronger expansion.
Whether that balance can continue will depend partly on the duration of the Iran war, the direction of oil and gasoline prices and the extent to which higher energy costs reduce consumer spending or corporate profits. For now, the sharp drop in unemployment claims indicates that the anticipated strain has not yet reached most American workplaces.
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