The number of new claims for unemployment benefits in the United States fell by 13,000 to 228,000 in the week ended May 3, indicating that the labor market remains strong. The decline partly offset a temporary surge due to New York’s spring break. However, economists warn that this may not last long, as rising trade tensions and tariffs are expected to start weighing on real economic data.
President Donald Trump has raised tariffs on Chinese imports to 145%, a move that Federal Reserve Chairman Jerome Powell described as larger than expected. Powell warned that if the tariffs continue, they could fuel inflation, slow economic growth and increase unemployment. The Federal Reserve also kept its overnight interest rate in a range of 4.25%–4.50%, while expressing concern about growing economic risks.
Despite the positive claims figures, there are early signs of stress in the labor market. Some companies affected by trade tensions have begun to reduce their workforces in small increments, while manufacturing data showed that layoffs are increasingly becoming a top option for companies to cut costs. Economic uncertainty has also led companies to be cautious about hiring new workers.
While the unemployment rate remained at 4.2% in April, the median length of unemployment rose to 10.4 weeks, suggesting that those who lost their jobs are taking longer to find new ones. At the same time, the number of people receiving benefits after the first week of relief fell by 29,000 to 1.879 million, a sign that hiring may still be active for the time being.
