A modest dip in U.S. jobless claims belies emerging signs of labor market cooling, as tariffs and inflation risks complicate prospects for sustained economic growth.
At a Glance
- Weekly unemployment claims fell to 245,000 but remain elevated
- The four-week moving average is now the highest since August 2023
- Monthly job growth has slowed to an average of 124,000 so far in 2025
- Trump-era 10% tariffs are weighing on business investment and costs
- The Federal Reserve is expected to hold rates steady amid uncertainty
Tepid Labor Gains Despite Low Unemployment
New data from the U.S. Department of Labor show that weekly unemployment claims declined slightly to 245,000, but the four-week moving average—considered a better gauge of trends—has reached its highest level since August 2023. While the job market remains historically tight, hiring momentum is slowing.
Employers added an average of 124,000 jobs per month through May 2025, according to the latest government figures—down sharply from 168,000 per month in April 2024 and far below the near-400,000 monthly average seen during the post-pandemic rebound.
Tariffs Fuel Headwinds, Cloud Fed Outlook
Economic analysts point to rising drag from President Trump’s revived 10% import tariffs on thousands of foreign goods, which are driving up costs for businesses and consumers alike. This tariff regime, first imposed in early 2025, is dampening business confidence and exacerbating supply chain frictions.
At its most recent meeting, the Federal Reserve opted to hold interest rates steady despite some calls for easing, citing persistent inflation concerns partly linked to higher import prices. “The balance of risks is shifting,” one Fed official told Bloomberg, “but we are watching employment data closely.”
Outlook: Landing or Slide?
Many economists now predict a “soft landing” scenario where growth slows but avoids outright recession. However, rising unemployment claims, weakening hiring, and elevated tariffs raise the risk of a deeper pullback if conditions deteriorate further. A worsening trade war or new supply shocks could tip the balance.
Whether the Fed pivots later this year will depend on whether wage growth and consumer demand can withstand current policy headwinds. For now, the labor market remains strong—but flashing warning signs are becoming harder to ignore.
