Your construction seems strange!
Every line that reachs a step are processed by it! There for if you dont whant to "update" a line... just dont send it to the update step!
You got a table input connected directly to a table output... and then you do a UPDATE on the same output table with a constant?
How do you define what is on your input? Did you cross tha table1 with table2 at the input to sort new lines? If so... why not put status on the query or in the constant before insert?
Based on what Im seeing... there is no need for update, just a better input and you could use a insert/update step to do pretty much the same, but there is always several ways to go.