The number of non-farm jobs is expected to increase by 60,000 in March. Economists believe it will take time for the oil shock to impact the labor market. The unemployment rate is expected to remain at 4.4%. By Lucia Mutikani.
Job growth in the United States likely rebounded in March due to the end of a strike by healthcare workers and warming temperatures. However, risks of a deteriorating job market are increasing due to the escalation of the Middle East war.
Economists expect the anticipated rebound to bring job growth back to last year’s pace, close to the rate of decline. The labor market has been shaken by uncertainty, starting with President Donald Trump’s aggressive tariff policies. While some clouds were beginning to clear, the U.S. Supreme Court in February overturned tariffs imposed by Mr. Trump under a law intended for use in national emergencies.
However, Mr. Trump reacted by imposing global tariffs for a period of up to 150 days. At the end of February, the U.S. and Israel launched strikes against Iran, causing global oil prices to surge over 50% and domestic gas prices to rise. Economists noted that the month-long war added a new layer of uncertainty for businesses and anticipated that the labor market would be affected this quarter.
“We saw it last year, uncertainty leads to businesses pulling back on hiring,” said Sophia Kearney-Lederman, senior economist at FHN Financial. “Last year, the big uncertainty was around tariffs. This year, it’s what the conflict in the Middle East and rising oil prices will mean.”
The Bureau of Labor Statistics’ closely watched employment report is expected to show non-farm jobs increased by 60,000 last month, according to a Reuters survey of economists. Job numbers decreased by 92,000 in February, marking the sixth decline since January 2025 and the second largest drop.
The unemployment rate is expected to remain at 4.4%, but some economists believe it could reach 4.5%. Good Friday is not a public holiday in the U.S., but some financial markets are closed.
Approximately 31,000 striking nurses at Kaiser Permanente in California and Hawaii returned to work at the end of February, which is expected to boost payroll in the healthcare sector in March. The healthcare sector has been a key driver of job growth, and economists expect it to continue due to demographic shifts.
There is also expected to be a rebound in employment in the construction sector, as well as in leisure and hospitality, following declines attributed to winter hardships. Last month, job growth likely remained limited in some sectors, such as social assistance. BLS data this week showed job openings saw their largest drop in over a year and a half in February, indicating a decrease in labor demand.
“Everything is moving at a snail’s pace, there’s a lot of uncertainty, and we continue to shed people,” said Ron Hetrick, chief employment economist at Lightcast.
HISTORICALLY LOW LABOR SUPPLY GROWTH
The Trump administration’s mass deportations have also contributed to the labor market paralysis, reducing supply, ultimately harming both goods and services demand and workers. Historically low labor supply growth means that less than 50,000 jobs per month have been needed to keep up with working-age population growth, economists estimated.
Some believe the equilibrium rate is zero, or even negative. JPMorgan economists warned that “negative payroll figures for a month will become more common,” adding that “even with sufficient job growth to stabilize the unemployment rate, negative payroll figures could happen at least a third of the time.”
While March was likely too early to capture the effects of the Middle East conflict, some economists said they could become evident as early as April’s employment report. This week, the national average retail price of gasoline exceeded $4 per gallon for the first time in over three years.
This will result in inflation and erosion of households’ purchasing power, counteracting some of the strength in wage growth and slowing spending.
Average hourly wages are expected to have increased by 0.3% last month, translating to an annual wage growth of 3.7%. The war wiped out about $3.2 trillion from the stock market in March. On Wednesday, Mr. Trump promised more aggressive strikes on Iran. “Businesses will hunker down and go into their bunker for a while,” said Brian Bethune, economics professor at Boston College. “In my view, this period will likely be one or two months. So we’ll probably see that in April and May. The outlook for the second quarter is not good.”
The March employment report will not impact interest rate outlooks, economists said, as supply chain disruptions due to the conflict have not yet filtered into the economy.
The likelihood of a rate cut this year has significantly diminished. The Federal Reserve left its benchmark overnight interest rate in the range of 3.50%-3.75% last month.
“In the absence of a recovery in layoffs, we see the ‘low hires, low layoffs equilibrium’ as uncomfortable but sustainable and not requiring preventive support from the Fed,” said Andrew Husby, chief economist at BNP Paribas Securities Corp.
