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By Lucia Mutikani
March 20, 2025 – 4:14 PM UTC
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WASHINGTON (Reuters) – 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.
Despite the low level of layoffs, more people are staying on jobless rolls longer compared to the same period last year. Economists say still-high interest rates and policy uncertainty are making companies cautious about increasing headcount.
“The data continue to tell a story of relatively few private-sector layoffs but limited employment opportunities for those who are unemployed,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics.
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 the 203,000-242,000 range 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 a marginal 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 led 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.
“But the chaotic nature of the terminations has jerked federal workers through firings, reinstatements, and in-between statuses like ‘administrative leave,’ meaning many don’t show up as fully unemployed yet,” said Andrew Stettner, a senior fellow at the Century Foundation.
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.
The dollar rose against a basket of currencies. U.S. Treasury yields fell.
SLOW BUSINESS FORMATION
Trump’s often chaotic tariffs campaign has hurt business sentiment, with economists saying policy volatility was making it harder for companies to plan ahead.
Aggregated credit and debit card data published this week by Bank of America showed a broad moderation in small business spending. The 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 the end of this year.
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. Claims rose moderately between the February and March survey periods.
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. Continuing claims were around 1.795 million a year ago.
The Fed projected the unemployment rate would rise to 4.4% this year, revised up from the 4.3% forecast in December.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao
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