Applications for U.S. unemployment benefits increased last week, though layoffs remain near historically low levels, indicating continued underlying strength in the labor market. According to the Labor Department’s report released Thursday, initial claims for jobless aid rose by 9,000 to 197,000 in the week ending July 25. This figure came in below analysts’ expectations, who had forecast roughly 207,000 new claims. The prior week’s total was revised slightly upward to 188,000—the lowest level seen in more than five decades.

Weekly unemployment filings are widely viewed as a timely barometer of layoffs and reflect the overall health of the job market. Despite recent volatility driven by geopolitical tensions, including the ongoing conflict between the U.S. and Iran that has contributed to surging oil prices, the labor market has remained relatively resilient. Nevertheless, economists caution that prolonged tensions and sustained increases in energy costs could compel companies to reduce staffing as they seek to cut expenses.

Crude oil prices fluctuated in the wake of the conflict, with U.S. benchmark crude closing Thursday at $83.36 per barrel after a modest decline from a prior day’s 6.6% gain. Concurrently, average gasoline prices in the U.S. have climbed back above $4 per gallon, exerting pressure on both consumers and businesses, particularly those with high fuel dependencies.

The economic backdrop also features persistent inflationary pressures. The Federal Reserve’s preferred measure of inflation, the personal consumption expenditures (PCE) price index, rose 3.7% year-over-year in the latest report, well above the central bank’s 2% target. Compounding concerns, second-quarter GDP growth was reported at a subdued annualized rate of 1.5%, falling short of expectations and signaling slower economic momentum.

Fed officials have indicated a readiness to raise interest rates further if inflation does not come down, a move that could increase borrowing costs for businesses and potentially dampen hiring. Reflecting caution among employers, June’s jobs report showed only 57,000 new positions created—the lowest monthly gain in over a year. The unemployment rate edged down to 4.2%, but this improvement primarily reflects a decline in the labor force as some job seekers stopped looking for work rather than a strong hiring surge.

Over the past two years, job growth has slowed, influenced by trade tensions, government workforce reductions, and prior interest rate hikes aimed at taming inflation. Several major employers, including Verizon, UPS, Amazon, Disney, Starbucks, Walmart, and Microsoft, have recently announced workforce reductions amid softening demand and economic uncertainties.

The Labor Department’s data also showed the four-week moving average of initial claims fell slightly by 5,000 to 202,750, smoothing out weekly fluctuations. Continued low levels of unemployment claims suggest that while hiring has moderated, widespread layoffs remain limited. Moreover, the total number of ongoing unemployment benefit recipients for the week ending July 18 decreased by 7,000 to 1.78 million, further underscoring the relative stability of the U.S. labor market despite economic headwinds.