The number of Americans filing new applications for unemployment benefits increased slightly last week, suggesting the labor market remained stable in March, though the outlook is darkening amid rising trade tensions and deep cuts in government spending.
Initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 223,000 for the week ended March 15, the Labor Department said on Thursday. Economists polled by Reuters had forecast 224,000 claims for the latest week.
Claims have been bouncing in the middle of their 203,000-242,000 range for this year, with layoffs generally staying low and hiring cooling off.
A separate program for unemployment compensation for federal employees (UCFE), which is reported with a one-week lag, still showed little impact of the mass firings of public workers by President Donald Trump’s administration as part of an unprecedented push to shrink the government.
Labor analysts said the rapid firings by tech billionaire Elon Musk’s Department of Government Efficiency, or DOGE, were in some cases being undertaken in ways that made it harder for laid-off workers to file for unemployment benefits.
The government in court filings this week acknowledged that nearly 25,000 recently hired workers had been fired. A judge ruled their terminations were likely illegal, resulting in them being reinstated, though placed on administrative leave at least temporarily.
Trump’s often chaotic tariffs campaign has hurt business sentiment, with economists saying policy volatility was making it harder for companies to plan ahead.
Bank of America aggregated credit and debit card data published this week showed a broad moderation in small business spending. Bank of America Institute said the shift in sentiment and capital expenditures could slow new business formation and ultimately the small business labor market, the key driver of employment growth.
The Federal Reserve on Wednesday held its benchmark overnight interest rate in the 4.25%-4.50% range, in a nod to the uncertainty swirling around the economy. U.S. central bank policymakers, however, indicated they still anticipated reducing borrowing costs by half a percentage point by year end.
Fed Chair Jerome Powell told reporters that “conditions in the labor market are broadly in balance.”
The claims data covered the period during which the government surveyed businesses for the nonfarm payrolls portion of March’s employment report. The economy added 151,000 jobs in February. Data next week on the number of people receiving benefits after an initial week of aid, a proxy for hiring, could offer more clarity on the health of the labor market in March.
The so-called continued claims increased 33,000 to a seasonally adjusted 1.892 million during the week ending March 8, the claims report showed. The Fed projected the unemployment rate rising to 4.4% this year, revised up from the 4.3% forecast in December.