The U.S. labor market is bracing for a sharp deceleration in April hiring, with economists forecasting just 67,000 new jobs—roughly one-third of March's 178,000 gains—as businesses grapple with elevated energy costs, policy uncertainty, and structural shifts that are fundamentally reshaping the American workforce. The projection comes as jobless claims remain historically low but rising costs continue to burden employers and consumers alike.
The Labor Department reported Thursday that Americans filing for unemployment benefits in the week ending May 2 rose by 10,000 to 200,000, fewer than the 205,000 new applications analysts surveyed by FactSet had expected. The previous week's claims figure, which was the fewest since 1969, was revised up by 1,000 to 190,000. The four-week moving average of jobless claims fell to 203,250, down 4,500 from the previous week. The total number of Americans filing for unemployment benefits for the previous week ending April 25 declined by 10,000 to 1.77 million.
Energy Costs and Economic Uncertainty
Weekly filings for unemployment benefits are considered a proxy for U.S. layoffs and a near real-time indicator of the health of the job market. Despite dwindling layoffs shown in government data, the Iran war, now in its third month, has injected uncertainty about how it will affect the U.S. and global economies even as Iran and the U.S. remain under a ceasefire agreement with growing optimism that an end to the war is near. U.S. financial markets have rebounded near record levels, and prices for a barrel of U.S. crude oil remain elevated around $90 per barrel. That is down from highs of $112 last month, but still 36% higher than before the war began.
Gas prices also are much higher since the war began, with AAA saying the national average Thursday was $4.56 a gallon, saddling businesses and consumers with higher costs. The Labor Department reported last month that U.S. employers added an unexpectedly strong 178,000 new jobs in March, nudging the unemployment rate back down to 4.3%. That followed a surprisingly large loss of 92,000 jobs in February. Revisions also trimmed 69,000 jobs from December and January payrolls, a sign that the labor market remains under strain.
Structural Shifts and Hiring Reluctance
A number of high-profile companies have cut jobs recently, including Morgan Stanley, Block, UPS, Amazon and Disney. Employers added fewer than 200,000 jobs last year, compared with about 1.5 million in 2024, according to FactSet. Economists say the American labor market appears stuck in a "low-hire, low-fire" state that has kept the unemployment rate historically low, but has left those out of work struggling to find a new job. The recent artificial intelligence boom and the investment required to develop it is also making companies reluctant to hire.
CNN said the April jobs report was expected to show that the U.S. economy added 67,000 jobs in April, roughly one-third of the 178,000 jobs created in March. It said the labor market is in the throes of an evolution and quoted Nicole Bachaud, a labor economist at ZipRecruiter, as saying, "The labor market is absolutely transforming, and it's not going to look the same as our pre-2020 trends." Bachaud said there was not yet a clear picture of what the new normal is.
CNN said the U.S. job market and broader economy have been subject to a slew of exogenous shocks during the past six years, chief among them a once-in-a-century global pandemic, and that structural changes include an aging U.S. population, a sharp reduction in net immigration and technological innovations, notably artificial intelligence. It said labor force growth is slowing as Baby Boomers retire, industries such as health care and social services have expanded, Trump administration policies of immigration restrictions and mass deportations have shifted the trajectory of labor supply, and AI is reshaping jobs, industries and the economy.
CNN also said getting a firm read on the labor market in 2026 has been like riding a roller coaster, with the economy adding an estimated 160,000 jobs in January and losing 133,000 jobs in February before bouncing back to March's total. It said the volatility can be partly attributed to weather, labor strikes, lower-than-typical post-holiday layoffs and recalibrations to how the Bureau of Labor Statistics estimates payroll changes at new and closed businesses, referred to as the birth-death model.
Joe Brusuelas, chief economist at RSM US, said the top-line payroll number could continue to fluctuate and that his firm had moved away from emphasizing any given month and was now looking at a smooth three-month average. From January through March, the average monthly gain was 68,333, and the consensus estimate of 67,000 jobs added was in line with that average. FactSet estimated the unemployment rate would remain at 4.3%.
Wage Growth and Inflation Pressures
CNN said April's projected job growth was still running above trend, according to Gregory Daco, chief economist at EY-Parthenon, which was forecasting 45,000 jobs added last month. Daco wrote in a note to investors on Wednesday that the expected April gain should still surpass the breakeven pace needed to keep unemployment steady, meaning the unemployment rate was likely to tick down to 4.2%. CNN said the breakeven rate is the number of monthly jobs added to keep the unemployment rate stable, and that economists and policymakers are still trying to home in on that rate because of structural shifts in the economy. Brusuelas put his "speed limit for hiring" at about 25,000 jobs per month.
CNBC said the Bureau of Labor Statistics was expected to report a gain of just 55,000 jobs in April when it released its job count on Friday morning at 8:30 a.m. ET, enough to keep the jobless rate at a relatively low 4.3%. It said the total picture was one of a labor market that, while undoubtedly cooling, was generally stable and resilient despite a number of challenges. CNBC quoted David Tinsley, senior economist at the Bank of America Institute, as saying, "The headline message remains similar to previous employment reports, if anything, accentuated though. The labor market momentum in terms of payrolls has really turned solid."
CNBC said March's 178,000 job gains were the best month since December 2024, but the 12-month average was just 22,000 and, excluding health care, the economy had seen a net loss of jobs. Tinsley said the overall picture seemed "quite solid, both in terms of wages and payrolls, but lots of Ks," and added, "There's lots of divergence in this economy right now, even though the headline looks solid."
CNBC said average hourly earnings were projected to have risen 3.8% annually in April, but that did not tell the story of where the gains were flowing. Bank of America's data showed that in April the top one-third of earners saw 6% after-tax wage gains while the bottom group showed a gain of 1.5%. CNBC said that was particularly painful because the consumer price index rose 3.5% through March, indicating low earners saw a net loss of income. Tinsley said, "Just beneath the surface, distributions matter a lot here." CNBC also said hiring disparities were appearing by business size, with small businesses seeing declines over the past three months.
Federal Reserve Policy Challenges
CNBC said the crosscurrents were presenting challenges to Federal Reserve policymakers, who have grown increasingly split over the direction of interest rate policy. It said New York Fed President John Williams noted the "conflicting signs" between data such as weekly jobless claims showing stability and consumer sentiment surveys pointing to a softening picture. Williams said, "Much of the hard data points to stabilization, while some of the soft data suggest continued gradual slowing." He added, "Together, these indicators suggest increasing labor market slack," and said the dissonance in the hard and soft data may reflect the effects of a low-hire, low-fire labor market and should be monitored closely for signs that conditions are shifting.
CNBC said investors are betting that the labor market's relative stability, combined with elevated inflation, will keep the Fed on hold through the year, and that Williams repeated his view that monetary policy was "well-positioned" for the current climate. CNN said post-pandemic labor hoarding practices are still unwinding, high uncertainty triggered by inflation, tariffs, policy shifts, geopolitical developments and interest rates has stifled hiring and possibly ushered along some AI adoption, and the potential outstanding effects from the Iran war and oil shock on consumer spending patterns and input costs remain.
CNN said some of the frequent adjectives used to describe the labor market have been "solid," "resilient" and "steady," but consumer sentiment surveys show workers and job seekers are more downbeat. The "low-hire, low-fire" labor market has made it harder for some people to get jobs and has resulted in a slowdown of wage gains, which could soon be outstripped by inflation. CNN said the latest data released this week showed the ongoing labor market dynamics had not changed dramatically: the Job Openings and Labor Turnover Survey showed hiring bolted higher in March after falling to near-historic lows the month before, while job openings fell for the second consecutive month. It said weekly initial jobless claims had not escalated and remained near pre-pandemic levels.
Why This Matters:
The sharp slowdown in hiring reveals the real costs of policy uncertainty and elevated energy prices on American businesses and workers. With oil prices still 36% higher than before the Iran war began and gas averaging $4.56 per gallon, employers face mounting input costs that discourage expansion and hiring. The divergence in wage gains—with lower earners seeing real income losses as inflation outpaces their 1.5% wage growth—underscores the uneven burden of rising prices on American families. Small businesses, traditionally the engine of job creation, are cutting back amid these pressures. The Federal Reserve faces a difficult choice between addressing inflation and supporting a labor market where structural shifts, including immigration restrictions and AI adoption, are fundamentally changing the employment landscape. The three-month average of just 68,333 jobs added monthly represents a dramatic slowdown from 2024's pace, signaling that businesses are adapting to a new normal of constrained growth and cautious hiring practices.