Low Weekly Unemployment Claims Are Masking a Much Darker Story About American Labor

It felt like good news when the Washington number was released last Friday. Employers in the United States created 178,000 new jobs in March, easily exceeding the predictions of the majority of economists, and the unemployment rate fell to 4.3%. For the week ending March 28, initial claims for unemployment benefits, which serve as a sort of early warning system for labor market stress, fell to 202,000, which is close to the lowest levels in two years. When combined, these are the kinds of figures that are presented as proof of resiliency on cable news. And they are, in a limited sense. There aren’t many people getting fired. There won’t be any layoffs. However, if you take a closer look at the whole picture, something more intricate begins to show.

Economists are constantly aiming for “low hire, low fire.” It sounds almost comforting, like a labor market that has reached a stable equilibrium, with businesses retaining their employees, employees keeping their jobs, and everyone essentially remaining in place. In reality, it depicts a stagnant market. Hiring has slowed to the point where it would be concerning in most other economic times.

Over the three months ending in February, private nonfarm payrolls grew by an average of just 18,000 jobs per month. The job market isn’t cooling. That is more akin to a stalled one. A California healthcare workers’ strike and severe winter weather were partially blamed for the February payroll figure, which showed a loss of 92,000 jobs. The 178,000 increase in March appears better, but part of that is just the math of recovering from an exceptionally poor month rather than proof of real momentum building.

The March report contains a detail that merits greater attention than it has gotten. In February, the hiring rate fell to its lowest level since 2020, the spring when the economy was essentially shut down by an unidentified pandemic. Businesses have learned to keep their employees close after being burned by the chaos of quick layoffs and even more chaotic rehiring during COVID.

That makes sense. However, the outcome is a market with job advertisements, a flood of applications, and few offers. The headline unemployment rate does not even come close to describing what someone in Columbus, Charlotte, or Sacramento is going through right now when they are sending out resumes.

Additionally, wage growth is slowing down, which has subtle long-term effects. In March, private sector employees’ average hourly wages increased 3.5% year over year, the slowest rate since 2021 and hardly enough to keep up with inflation. Workers are bringing home less than they would have if hours had remained constant, as the average workweek has decreased to 34.2 hours. Even if you have a job, you may still be under pressure from a paycheck that doesn’t quite cover your expenses. For a portion of the workforce that isn’t included in the jobless claims data because they haven’t been laid off, that is an increasing reality. They’re just waiting, working fewer hours, and making less money.

The federal workforce, on the other hand, has shrunk at an unprecedented rate and scale. Since the workforce peaked in October 2024, the federal government has lost another 18,000 jobs in March alone, bringing the total decline to about 355,000 jobs, or 11.8%. These are actual people living in actual cities: Washington, of course, but also the smaller federal centers in Virginia, Maryland, Colorado, and New Mexico, where employment by the government has long stabilized otherwise unstable local economies. It takes months for the downstream effects of that contraction to fully manifest in local businesses, housing markets, and spending. Most likely, they haven’t signed up yet.

An external shock that is not fully reflected in the March jobs data is layered on top of all of this. For the first time in more than three years, the average retail price of gasoline in the country has surpassed $4 per gallon due to the ongoing U.S.-Israeli conflict with Iran, which has caused global oil prices to rise more than 50% since the war started. Delivery drivers, commuters, small manufacturers, and rural workers are disproportionately affected by this expense compared to remote professionals in coastal cities. Economists have been quite clear about what they anticipate: hiring will be slowed and unemployment will rise in the coming months due to continuously rising energy prices. When, not whether, is the question.

The March report’s fine print makes it difficult to ignore another fact: the household survey used to calculate the unemployment rate had an all-time low response rate of 63.9 percent. Fewer and fewer households are filling out that survey, which necessitates an actual in-person interview.

While lower response rates do not necessarily indicate that the data is inaccurate, they do indicate that the margin of error surrounding statistics such as the unemployment rate has increased. There are now more caveats on a number that already has them. In late March, High Frequency Economics chief economist Carl Weinberg stated unequivocally: “We are certain that things will deteriorate. But they haven’t yet begun to deteriorate.” That isn’t a comforting statement disguised as one.

In April 2026, the American labor market appears to be relatively stable. There are few unemployment claims. The March employment figure exceeded expectations. Before making a decision, the Federal Reserve has good reason to keep interest rates unchanged while it watches how the oil shock plays out.

Beneath that surface, however, is a labor market that has stopped hiring at a significant rate, is paying workers slightly less in real terms each month, has eliminated hundreds of thousands of federal positions, and is preparing—most businesses covertly, few openly—for what an extended Middle East conflict and $4 gasoline actually do to an already sluggish economy. Resilience is mentioned in the headline. The specifics convey a sense of suspense.