By Lucia Mutikani
WASHINGTON (Reuters) -The number of Americans filing new applications for unemployment benefits fell last week, pointing to continued labor market stability ahead of potential volatility from import tariffs.
President Donald Trump on Wednesday unveiled a 10% minimum tariff on most goods imported to the United States, sparking threats of retaliation and rattling global financial markets.
Fitch Ratings estimated that the nation’s tariff rate was now the highest in more than a century. Economists have warned of high inflation and possible job losses as households slash spending and businesses pull back on investment, potentially pushing the economy into recession. Business and consumer sentiment had already tanked before Trump’s sweeping tariffs.
“This adverse trade news from the White House is an extreme external shock to the economy that is in all the university textbooks, and so too is the need for being on high alert for signs of recession,” said Christopher Rupkey, chief economist at FWDBONDS. “Weekly job layoffs made by companies are minimal at the moment, but it is too early to forecast what businesses will do in the weeks and months ahead.”
Initial claims for state unemployment benefits dropped 6,000 to a seasonally adjusted 219,000 for the week ended March 29, the Labor Department said on Thursday. Economists polled by Reuters had forecast 225,000 claims for the latest week.
Low layoffs have kept the labor market humming. There were 1.07 job openings for every unemployed person in February, down from 1.13 in January, the government reported on Tuesday.
But economists worry that Trump’s tariffs blitz since returning to the White House in January could hurt the labor market. Trump sees tariffs as a tool to raise revenue to offset his promised tax cuts and to revive a long-declining U.S. industrial base, a view not shared by economists.
U.S. stocks opened sharply lower. The dollar plunged against a basket of currencies. U.S. Treasury yields fell.
DEEP SPENDING CUTS
Deep spending cuts being implemented by the Trump administration, which have seen mass firings of federal government workers, also pose downside risk to the labor market.
The mass firings are yet to significantly show in a subset of the claims report amid ongoing legal battles.
But global outplacement firm Challenger, Gray & Christmas said on Thursday that it had over the past two months tracked 280,253 planned layoffs of federal workers and contractors impacting 27 agencies. It said more than half of the 497,052 layoffs announced in the first quarter were in Washington D.C.
While overall layoffs have remained historically low, hiring has been tepid, resulting in those who lose their jobs experiencing long spells of unemployment.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 56,000 to a seasonally adjusted 1.903 million during the week ending March 22, the claims report showed.
That was the highest level since November 13, 2021. The claims data have no bearing on the closely watched employment report for March as they fall outside the survey period.
Nonfarm payrolls likely increased by 135,000 jobs last month after rising 151,000 in February, a Reuters survey predicted. The unemployment rate is forecast unchanged at 4.1%.
“Businesses are slowing hiring sharply amid heightened economic policy uncertainty,” said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. “The risk ahead is that this gradual upward trend in unemployment gathers momentum.”
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)
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