Layoffs Plunge, But Iran Conflict Threatens U.S. Job Market

Experts warn the Middle East crisis could pressure employers to tighten hiring and firing amid uncertainty and rising costs.

Published on Mar. 5, 2026

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Despite a sharp drop in layoff announcements in February, labor market experts say the outbreak of military action in the Middle East could put pressure on U.S. employers and lead to more job cuts depending on the duration of the conflict.

Why it matters

The Iran conflict has already unsettled global markets and threatens to push up energy prices, adding to affordability pressures for American consumers. Experts warn the crisis could evolve into a broader threat to the U.S. economy depending on how long it lasts.

The details

Layoff announcements plummeted 55% between January and February to 48,307, according to the outplacement firm Challenger, Gray & Christmas. However, workplace expert Andy Challenger said the unfolding conflict in Iran "may bring more layoff plans as companies tighten belts amid uncertainty and higher costs." The transportation sector, which saw layoffs spike 872% in the first two months of 2026 compared to 2025, is seen as particularly vulnerable to disruptions from the crisis.

  • Layoff announcements dropped 55% from January to February 2026.
  • In the first two months of 2026, the current total of 156,742 layoffs marks the lowest opening two-month period since 2022.
  • The U.S. and Israel began a series of targeted strikes on Iran on Saturday, causing a spike in Brent crude oil prices.

The players

Andy Challenger

A workplace expert at the outplacement firm Challenger, Gray & Christmas.

Paul Krugman

An economist who wrote in a recent Substack post that the Iran conflict "isn't occurring in isolation" and "could be the straw that breaks the camel's back" for the U.S. economy.

Neel Kashkari

The president of the Minneapolis Federal Reserve, who said it's "just too soon to know" the impact of the Iran conflict on inflation and monetary policy.

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What they’re saying

“One shouldn't exaggerate the economic fallout from this war. But it isn't occurring in isolation: There are many stresses on our economy, and this could be the straw that breaks the camel's back—a straw that becomes heavier the longer the war goes on.”

— Paul Krugman (Substack)

“I think right now it's just too soon to know what imprint this has on inflation and for how long.”

— Neel Kashkari, President, Minneapolis Federal Reserve (Bloomberg)

What’s next

The Federal Reserve will need to closely monitor the economic impact of the Iran conflict as it weighs future interest rate decisions.

The takeaway

The Iran conflict poses a new threat to the U.S. job market and economy, which was already grappling with affordability pressures, just as layoffs had started to decline. Experts warn the crisis could lead to more job cuts if it persists and disrupts supply chains, energy prices, and consumer spending.