US companies continue to add jobs in the face of an economic shock from Iran war

U.S. job market shows resilience despite Iran war disruptions, adding 115,000 positions in April, nearly double the forecasted 65,000. The unemployment rate held steady at 4.3%, according to Labor Department data released Friday.

The ongoing conflict in Iran has caused historic disruptions to global oil supplies, pushing average U.S. gasoline prices above $4.50 per gallon this week. Despite these pressures, the American labor market has demonstrated unexpected strength, while the impact of tariffs imposed during President Donald Trump’s administration has proven less severe than initially feared.

“The labor market is not booming, but it is proving harder to break than many feared,” said Olu Sonola, head of U.S. economics at Fitch Ratings.

Healthcare continued to drive employment gains with 37,000 new jobs in April, while transportation and warehousing companies added 30,000 positions. Manufacturing, however, lost 2,000 jobs last month and has shed 66,000 positions over the past year, despite protectionist policies intended to bolster factory employment.

Gus Faucher, chief economist at PNC, explained that businesses are largely viewing the Iran conflict as temporary. “We continue to see solid growth in consumer spending. And we’re seeing strong business investment, particularly around tech and AI. The economy continues to expand. We’ve weathered some shocks. The worst of the tariff impact is likely over.”

However, Faucher warned that prolonged conflict in Iran could intensify economic pressures. “The longer conflict in Iran lasts, the higher energy prices go, the longer they stay elevated the greater the drag on the economy.”

The Labor Department also revised previous figures, reducing February and March payrolls by a combined 16,000 jobs. Wage growth remained moderate, with average hourly earnings increasing 0.2% from March and 3.6% year-over-year, aligning with the Federal Reserve’s 2% inflation target.

Labor force participation decreased in April to 61.8%, its lowest level since October 2021. This decline reflects ongoing demographic challenges, including Baby Boomer retirements and reduced immigration under Trump’s policies, which have shrunk the pool of available workers.

Matthew Martin of Oxford Economics notes that the “break-even point” – the number of new jobs needed monthly to prevent rising unemployment – is now approaching zero, reflecting these demographic shifts.

The Iran conflict began on February 28 when the U.S. and Israel launched military operations, prompting Iran to shut down the Strait of Hormuz, a crucial channel for approximately one-fifth of global oil and liquefied natural gas shipments. This disruption has driven energy prices higher and led economists to downgrade growth forecasts for both the U.S. and global economies.

Despite these challenges, some economic indicators remain positive. ADP reported that private employers added 109,000 jobs in April, the fastest pace since January 2025. Additionally, consumers are benefiting from larger tax refunds resulting from Trump’s tax legislation, enabling increased spending that encourages companies to hire.

The job market has shown signs of improvement after a difficult 2025, when employers created just 9,700 jobs monthly on average – the lowest non-recession figure since 2002. High interest rates and uncertainty about Trump’s economic policies contributed to last year’s hiring slowdown.

This year has shown progress, albeit uneven. January (160,000 jobs), March (185,000), and April (115,000) posted solid gains, while February saw a loss of 156,000 positions.

Healthcare remains the dominant force in U.S. employment, adding 456,000 jobs over the past year to meet the needs of an aging population. All other sectors combined have cut 205,000 positions during the same period.

Heather Long, chief economist at Navy Federal Credit Union, observed that April’s employment gains extended beyond healthcare, with retailers adding 22,000 jobs and construction companies creating 9,000 positions. “America’s hiring recession appears to be over,” she wrote, noting that average monthly job gains have increased from 10,000 in 2025 to 76,000 so far in 2026.

Long added a cautionary note about inflation: “The bad news is inflation is eating up wage gains again. Wages grew at 3.6%. That certainly won’t be enough at a time when inflation is expected to hit 4%. Americans still have jobs, but they are financially squeezed by surging gas prices and transportation costs.”

The jobs report is likely to reinforce the Federal Reserve’s current stance of holding interest rates steady while it assesses the economic impact of the Iran war. Inflation jumped to 3.3% in March, a two-year high that exceeds the Fed’s target, largely due to rising gasoline prices.

The strong hiring data coincides with solid first-quarter corporate performances, further complicating the Fed’s decision-making process. According to Faucher, Friday’s report “actually makes it less likely that we see a rate cut anytime soon because the Fed can say: ‘The job market is solid. Let’s get inflation back down to 2%. This is not the time to cut rates.'”