U.S. job growth rebounded sharply in March as a strike by healthcare workers concluded and temperatures increased, but downside risks for the labor market are climbing due to the unrest in the Middle East that has no clear end in sight.
The largest increase in nonfarm payrolls in 15 months, reported by the Labor Department in its closely monitored employment report on Friday, followed a sharp decline in February. Still, the rebound exaggerates the health of the labor market. The average workweek was shorter last month.
Declining unemployment and labor participation
While the unemployment rate declined to 4.3 percent from 4.4 percent in February, that was because 396,000 people exited the labor force. This more than balanced out weakness in household employment.
Nonfarm payrolls rose by 178,000 jobs last month following a downwardly revised 133,000 drop in February, the Labor Department’s Bureau of Labor Statistics stated.
March’s employment report likely has no impact on the interest rate outlook, with the effects of supply chain disruptions from the conflict still permeating the economy. The probability of a rate cut this year has greatly diminished. The Federal Reserve maintained its benchmark overnight interest rate in the 3.50 percent to 3.75 percent range last month.
The healthcare sector accounted for the majority of job gains, adding 76,000 positions, partly reflecting the return to work of 35,000 employees at physicians’ offices following a strike. Employment also rose at hospitals.
Warmer weather boosted construction employment, which rose by 26,000 positions. Transportation and warehousing payrolls increased by 21,000 jobs. Employment in transportation and warehousing is down by 139,000 since reaching its peak in February 2025.
Declining federal government employment
There were further gains in social assistance employment. However, federal government employment declined by another 18,000. Since reaching a peak in October 2024, federal government employment is down by 355,000, or 11.8 percent. There were job losses in the financial activities sector.
The labor market has been buffeted by uncertainty, starting with President Donald Trump’s aggressive import tariffs. Just as some of the volatility began to subside, the U.S. Supreme Court in February struck down the duties, which Trump had implemented under a law intended for national emergencies.
Trump, however, responded by imposing a global tariff for up to 150 days. Data from the BLS this week showed job openings decreased by the most in nearly 18 months in February, pointing to slipping labor demand.
The average workweek eased to 34.2 hours from 34.3 hours in February. Average hourly earnings rose 0.2 percent after increasing 0.4 percent in February. Wages increased 3.5 percent in March year-on-year after advancing 3.8 percent in February.
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