The Iran War Just Made a Frozen Job Market Even Colder – Economists Are Warning

This spring, a certain silence has descended upon American hiring desks. So far, it’s not panic. It’s an unfamiliar sight—a recruiter looking through resumes with no real power to take action, holding her breath. When you walk by a career fair in Seattle or Jersey City, you can see it on the job seekers’ faces as well—a slight stiffening when they realize the booth is more courteous than promising.

Before anyone heard the words Strait of Hormuz on the morning news, the U.S. labor market was already in what economists refer to as a “low-hire, low-fire” mode. Outside of the pandemic shock, hiring rates had fallen to their lowest level since 2013. Then, on February 28, the United States and Israel started bombing Iran, which gave an already slow market an unnecessary new chill.

In a webinar last month at the Harvard Kennedy School, Stanford economist Nicholas Bloom put it plainly. Don’t quit your current job if you have one. He anticipates that the conflict will “chill the labor market even more.” When you speak with someone who has been applying for six months and has stopped checking their email before lunch, this kind of advice may seem dramatic.

The mood may be mysterious, but the mechanics are not. A blocked shipping route results in oil prices exceeding $100 per barrel, gas prices rising at the pump, and tightening supply chains in areas not included in the quarterly plan. Businesses, observing unpredictable costs, act as they would when they are perplexed. They hold off. They refer to it as prudence. Employees refer to it by a different name.

Citing “macroeconomic and geopolitical realities, especially in the Middle East conflict” in an internal memo, Unilever, the consumer conglomerate behind Dove and Vaseline, has already put a three-month hiring halt in place. Yes, it is a single company. However, Unilever typically doesn’t take the lead on these issues, which is part of what makes it noteworthy. Smaller businesses usually follow within weeks when the cautious giants recoil.

Gregory Daco of EY-Parthenon projects that employment will increase by roughly 20,000 per month during the first half of the year, and by December, the unemployment rate will be closer to 4.7%. He used the term “jobless expansion,” which is what economists use to soften something that is actually uncomfortable. He wrote that the odds of a recession are about 40%. Not a prediction. A caution.

The risk was described in a single conditional by Navy Federal Credit Union chief economist Heather Long. She stated, “then I think it’s a game-changer” if the Strait of Hormuz remains closed and oil prices remain above $100 through April. She proposed that layoffs would resurface in a manner not seen in many years. Speaking with people in this field gives me the impression that nobody genuinely wants to be correct about that aspect.

In 2025, the economy created just 116,000 new jobs, making it one of the weakest non-recession years in decades. It’s difficult to ignore how thin the cushion was as you watch this period of months play out. A conflict that takes place thousands of miles away has a way of identifying weak points. Currently, one of them is the labor market.