US jobless claims hit 4-month high amid Iran conflict and inflation

Applications for unemployment benefits in the United States reached their highest level in four months last week, signaling growing economic uncertainty exacerbated by the ongoing conflict in Iran, even as overall layoffs remain historically low.

The Labor Department reported Thursday that US applications for jobless aid for the week ending May 30 climbed by 13,000 to 225,000. This marks the highest figure since early February, prior to the US and Israeli attacks on Iran, though it still represents a historically low level. Analysts surveyed by FactSet had anticipated 211,000 new applications.

Weekly filings for unemployment benefits are widely regarded as a key indicator of US layoffs and offer a near real-time snapshot of the labor market's health.

Despite the historically low number of layoffs, the job market appears to be caught in what economists describe as a "low-hire, low-fire" dynamic. While this has kept the unemployment rate at a low 4.3%, it has left many individuals out of work struggling to secure new employment.

Although US employers added a surprising 115,000 new jobs in April, the war in Iran has injected significant uncertainty into the broader US economy and its labor market.

The Strait of Hormuz, a critical waterway through which one-fifth of the world’s oil passes, remains closed. Since the conflict began in late February, oil prices have surged by approximately 50 percent, pushing the average price for a gallon of gas in the US to $4.24,a substantial increase from less than $3 in late February. These escalating costs not only impact consumers' wallets but also make businesses hesitant to expand their workforce.

Government data further revealed that consumer-level inflation rose by 3.8 percent from April 2025, marking the largest jump in three years. Food prices are also on the rise, though analysts suggest they may not yet fully reflect the increased energy costs stemming from the Iran war. Another recent report indicated that wholesale prices soared by 6 percent from a year ago, reaching their highest point in over three years.

This inflationary pressure comes at a time when US inflation already exceeds the Federal Reserve’s 2 percent target. The Fed opted to maintain its benchmark interest rate at its last meeting, citing economic instability in the Middle East and persistently elevated inflation. Most analysts do not foresee the Fed cutting rates in the near future.

While lower interest rates can stimulate the economy and boost hiring, they also tend to fuel inflation, leading several Fed policymakers to indicate they are open to considering an interest rate hike this year.

Adding to the complexity, the recent boom in artificial intelligence and the substantial investment required for its development could potentially alter or even displace certain jobs.

Among the companies that have recently announced job cuts are Verizon, UPS, Amazon, Disney, Starbucks, and Walmart.

Weekly jobless aid applications have largely stabilized in a range between 200,000 and 250,000 since the US economy emerged from the pandemic recession. However, hiring began to slow about two years ago and tapered further in 2025, influenced by Donald Trump’s erratic tariff rollouts, his purge of the federal workforce, and the lingering effects of high interest rates aimed at controlling inflation.

Employers added fewer than 200,000 jobs last year, a stark contrast to the approximately 1.5 million jobs added in 2024, according to data firm FactSet.

The government is scheduled to release its May jobs report on Friday.

The Labor Department’s report on Thursday also showed that the four-week moving average of jobless claims, which helps smooth out weekly volatility, increased by 6,500 to 214,750.

The total number of Americans filing for unemployment benefits for the previous week ending May 23 decreased by 8,000 to 1.78 million, aligning with analyst forecasts.