228,000! The number of initial jobless claims in the U.S. last week fell more than expected. When will the effects of Trump's tariffs and DOGE layoffs become apparent?

The number of initial jobless claims in the United States fell more than expected, weakening market expectations for an imminent deterioration in the labor market.

According to data released by the U.S. Department of Labor on Thursday, for the week ending May 3, the number of initial jobless claims in the U.S. decreased by 13,000 to 228,000, lower than the market forecast of 230,000, ending a brief surge in claims during New York's spring break.

Meanwhile, for the week ending April 26, the number of continuing jobless claims—a proxy indicator of employment conditions—also fell by 29,000 to 1.879 million, better than the expected 1.895 million.

The decline in jobless claims indicates that the labor market remains resilient, contrasting sharply with the ongoing warnings from CEOs. Since the COVID-19 pandemic, initial claims have fluctuated within a healthy range of 200,000 to 250,000, indicating that companies are still reluctant to lay off employees who were difficult to recruit during the pandemic.

Tariff Clouds Looming, Threatening the Labor Market

Despite strong employment data, tariff threats are quickly becoming the sword of Damocles hanging over the labor market.

Federal Reserve Chairman Jerome Powell pointedly stated this week, “The announced tariff increases so far have far exceeded expectations,” and warned that “if they continue, they could lead to rising inflation, slowing economic growth, and increasing unemployment rates.”

Analysts believe this rare and clear warning should catch the attention of every investor. When the Federal Reserve Chairman publicly discusses rising unemployment rates, it is usually not a hypothetical discussion but an expression of concern about trends already seen in the data. The U.S. GDP contracted by 0.3% in the first quarter, partly due to companies rushing to import foreign goods before Trump’s tariffs took effect, disrupting normal trade patterns.

Labor Market Collapse May Be Just a Matter of Time

Corporate executives continue to warn of a deteriorating business environment, but data shows that large-scale layoffs have not yet occurred. How long can this contradictory situation last?

On the surface, the labor market appears rock solid, but cracks are widening beneath.

A survey by the Institute for Supply Management (ISM) last week showed that manufacturing employment remained sluggish in April, noting that “layoffs are a primary tool, indicating that reducing headcount is becoming more urgent.”

Companies such as Workday, Dow Chemical, CNN, Starbucks, Southwest Airlines, and Meta have all announced layoff plans this year. However, overall, the scale of these layoffs has been relatively limited and has not yet had a significant impact on national employment data The rising economic uncertainty has indeed led companies to be reluctant to increase hiring, causing unemployed individuals to experience longer periods of unemployment. The latest non-farm payroll report shows that the unemployment rate remained at 4.2% in April, but the median duration of unemployment jumped from 9.8 weeks in March to 10.4 weeks.

It remains unclear when the Trump administration's measures to reduce the federal workforce—driven by the efficiency department (DOGE) led by Elon Musk—will impact weekly unemployment data. However, according to media reports, the effects of federal workforce reductions have already become apparent, far beyond just the Washington D.C. area.

For investors, the labor market may be the last economic indicator to collapse. Although unemployment claims data has temporarily remained stable, Trump's tariff policies have harmed domestic business and consumer confidence in the U.S., increasing economic uncertainty.

Economists believe that the weakness reflected in business and consumer surveys will eventually transmit to actual data such as unemployment claims, inflation, and employment reports. It is not a question of "if," but rather "when."