The labor market is still adding jobs, but a quieter danger is building underneath: fewer Americans are even in the market to take them. The U.S. labor-force participation rate slipped to 61.9 percent in March, its lowest level since 1977 outside the pandemic, even as payrolls beat forecasts. An aging population explains part of the drop, but economists also point to the Trump administration’s immigration crackdown, which is narrowing the pool of available workers.
That shrinking labor supply leaves employers with less room to grow, and it helps explain why the job market feels stuck in a low-hire, low-fire pattern. The latest initial claims data showed workers are still holding onto jobs, with weekly claims rising only modestly to 219,000, while continuing claims fell to the lowest level since May 2024. But that stability sits beside longer job searches, weaker hiring and a median unemployment spell of 11.4 weeks, the longest in nearly four and a half years.
Iran has now added a second pressure point. Reuters said the war has pushed up energy prices and made a March inflation jump likely, while the Federal Reserve’s March minutes showed policymakers worried a prolonged conflict could keep energy costs elevated and feed into core inflation. That keeps interest rates pinned higher for longer, which is already showing up in consumer borrowing costs, from mortgages to credit cards. In practice, the economy is getting hit from both sides: less labor supply at home, and pricier credit as war-driven inflation risks spread through markets and household budgets.
