US Labor Market Remains Stable, Trade Deficit Widens in February

Unemployment claims drop unexpectedly, but economists warn war with Iran poses downside risk

Apr. 2, 2026 at 2:44pm

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New applications for U.S. unemployment benefits unexpectedly fell last week, suggesting labor market conditions remained calm in March. However, economists warned that the ongoing U.S.-Israeli war with Iran poses a downside risk, as higher energy costs could slow consumer spending and increase business costs, further restraining hiring. Meanwhile, the U.S. trade deficit widened in February as imports rebounded, though exports also jumped to a record high.

Why it matters

The labor market and trade data provide insights into the overall health of the U.S. economy. While the stable unemployment claims signal a resilient job market, the potential impact of the war with Iran raises concerns about future economic growth. Additionally, the widening trade deficit could continue to be a drag on GDP, underscoring the ongoing challenges of trade policy and global tensions.

The details

Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 202,000 for the week ended March 28, defying economists' expectations of 212,000 claims. However, the war with Iran has added another layer of uncertainty for businesses, with higher energy costs expected to slow consumer spending and increase business costs, further restraining hiring. The trade deficit widened 4.9% to $57.3 billion in February, as imports increased 4.3% to $372.1 billion, boosted by imports of capital goods, industrial supplies, and consumer goods. Exports also jumped 4.2% to a record high $314.8 billion.

  • Initial claims for state unemployment benefits were reported for the week ended March 28.
  • The trade deficit data is for February 2026.

The players

Nancy Vanden Houten

Lead U.S. economist at Oxford Economics.

Donald Trump

The President of the United States who vowed more aggressive strikes on Iran.

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What they’re saying

“We expect weaker job growth and a higher unemployment rate for 2026 than we had been forecasting prior to the war. But the war's impact on the labor market will take a bit more time to materialize.”

— Nancy Vanden Houten, Lead U.S. economist at Oxford Economics

“We must not let individuals continue to damage private property in San Francisco.”

— Robert Jenkins, San Francisco resident

What’s next

Economists will be closely monitoring the impact of the U.S.-Israeli war with Iran on the U.S. labor market and trade in the coming months, as higher energy costs and global shipping disruptions could further weigh on economic growth.

The takeaway

The U.S. labor market remains relatively stable, with unexpected declines in unemployment claims. However, the ongoing war with Iran poses a significant downside risk, as higher energy costs and global trade disruptions could slow consumer spending, increase business costs, and further restrain hiring. The widening trade deficit also highlights the continued challenges of trade policy and global tensions.