Will the Iran war slow U.S. hiring? Economists say risks are rising.

The ongoing Iran war is putting additional strain on the already slowing U.S. labor market, prompting major employers like Unilever to halt hiring plans. Unilever, the parent company of popular brands like Dove and Vaseline, recently announced a three-month hiring freeze citing the “macroeconomic and geopolitical realities, especially in the Middle East conflict” as the reason behind this decision.

Even prior to the outbreak of the Iran war, the U.S. labor market had been experiencing a slowdown, with the February Job Openings and Labor Turnover Survey reporting its lowest level since 2020. The unexpected loss of 92,000 jobs in February was a significant setback for a labor market that had been grappling with challenges such as tariffs and economic uncertainty over the past year.

Economists are predicting that the impact of the Iran war on hiring may not be immediately evident in the upcoming March jobs report. While the average estimate suggests a modest gain of 60,000 jobs, the full effects of the conflict may not be reflected just yet.

The economic repercussions of the Iran war are creating fresh challenges for businesses, including higher transportation costs and increased fuel prices. Airlines have already begun raising fares, and experts anticipate a rise in food prices due to disruptions in fertilizer supplies.

As companies navigate these new economic headwinds, they may delay hiring decisions to assess the impact of rising energy prices. The uncertainty surrounding the duration of the Iran war adds another layer of complexity for businesses like Unilever, which may be seeking ways to cut costs amid higher production and distribution expenses.

While soaring energy prices could potentially slow economic growth and lead to weaker hiring, experts believe that a significant increase in oil prices would be required to trigger a recession in the U.S. economy. Nonetheless, the ongoing uncertainty and high levels of volatility in the market are likely to contribute to a more cautious approach to hiring and business expansion.

Analysts from Goldman Sachs predict a potential increase in the unemployment rate by 0.2 percentage points to 4.6% by the end of September, with industries like arts and entertainment and accommodation and food services being particularly vulnerable to scaling back on hiring.

Consumers, who are feeling the financial strain of higher fuel costs, may cut back on discretionary spending, impacting industries like travel and luxury goods the most. As individuals prioritize essential purchases and focus on building their savings, businesses across various sectors are bracing for a period of uncertainty and potential slowdown in hiring.

In conclusion, the Iran war is adding a new layer of complexity to an already struggling U.S. labor market, with businesses and consumers alike facing challenges from rising energy prices and economic uncertainty. As companies navigate these uncertain times, the impact on hiring and job growth remains a key concern for the economy moving forward.