March Job Creation Beats Expectations

U.S. employers added 228,000 new jobs in March, significantly more than economists had expected, according to the latest employment report from the U.S. Bureau of Labor Statistics.

March’s job creation figure is also well above the average monthly gain of 158,000 new jobs over the prior 12 months. However, job gains for January and February were revised to be lower by 48,000.

The unemployment rate in March ticked up to 4.2%, still near historic lows, while a surge in federal government job cuts contributed to a blistering pace for announced layoffs.

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Economists said that while the report offers some relief about the fundamental state of the U.S. labor market, new economic uncertainty over just-announced sweeping tariffs could significantly erode demand for labor.   

“The private sector is doing better than expected, despite heightened uncertainty caused by new administration policy proposals, the efforts to cut the federal workforce, and announcement of widespread tariffs,” said Sydney Ross, an economic researcher at SHRM.

Federal government employment fell by only 4,000 jobs, which is less than the 10,000-job decline in January. However, this figure doesn’t include workers who took severance or who were laid off, reinstated and placed on administrative leave. A separate report from consultancy firm Challenger, Gray & Christmas indicated that announced federal workforce and contractor layoffs over the last two months have totaled more than 280,000 so far.

According to Challenger, the federal government led all sectors in planned layoffs in March with 216,215. So far this year, the government has announced 279,445 layoffs, an increase of 672% from the 36,195 announced in the first quarter of 2024.

“Job cut announcements were dominated last month by Department of Government Efficiency plans to eliminate positions in the federal government,” said Andrew Challenger, senior vice president at Challenger, Gray & Christmas. “It would have otherwise been a fairly quiet month for layoffs,” he said.

Joshua Smith, senior vice president at Adecco, said that the report is signaling that the labor market overall remains steady and durable. “As the report showed, employers are still focusing on hiring despite lingering economic uncertainties,” he said.

While the U.S. labor market is proving to be resilient, there are signs of cooling that are consistent with employers navigating uncertainty, said Ger Doyle, U.S. country manager at ManpowerGroup. “The labor market is locked in place because of uncertainty, with neither employers nor employees willing to make the first move,” he said. “Businesses are focused on maintaining their operations with their existing workforces, but if uncertainty continues, they may consider how to right-size their business.” 

Ross said that the report does not reflect rapidly evolving developments, such as potential job losses in the federal government occurring during the latter half of March or the effects from the recently announced tariffs.

“The situation is still fluid, leaving little room for employers to fully strategize and respond in the moment,” she said. “As federal layoffs play out and tariffs kick in, there is rising concern about the health of the labor market and economy in general. Additionally, the inflationary implications of these new policies may force the Federal Reserve to delay further interest rate cuts this year, meaning monetary policy will remain tighter for longer, exacerbating financial burdens for both employers and consumers.”

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Giacomo Santangelo, Monster economist, pointed to the tariffs already resulting in hiring freezes. “Small businesses, particularly in consumer goods, food, and retail, are struggling due to their dependence on global supply chains and limited pricing flexibility,” he said. “These tariffs are projected to result in the equivalent of 142,000 job losses and contribute to rising stagflation pressures.”

Meanwhile, the labor market was already generally pointing to retrenchment rather than expansion, as job openings continue to decline, and hires stay consistently low.

“Adding to the challenges posed by trade policy changes, there are signs that the structural and demographic problems that have been lurking on the horizon for years are becoming clearer,” said Cory Stahle, an economist at the Indeed Hiring Lab. “Alongside severely restricted immigration, the prime-age labor force participation rate and employment-population ratio both appear to have reached their ceiling, and as they plateau or begin to fall, labor supply issues will start to be felt.”

Industry Breakdown

Health care was the leading growth area for jobs, consistent with prior months, with 54,000 jobs added, including jobs at hospitals and nursing facilities.

Health care is acyclical, or removed from the business cycle, and is averaging over 50,000 jobs added per month, said Andrew Flowers, chief economist at Appcast.

“This aligns with job search data from Monster, where health care listings dominate,” Santangelo said. “Other sectors such as social assistance and transportation also posted gains, while retail trade added 24,000 jobs — though much of that reflects workers returning from strikes rather than new hiring momentum.”

Service-sector hiring picked up in March after a period of winter weakness in industries like leisure and hospitality. The transportation sector also had strong growth, adding jobs for couriers and messengers and in truck transportation.

Smith said that in the coming months, “we expect to see upticks in leisure and hospitality, which has the potential to be robust as we enter the summer travel season.”

Manufacturers are the most likely to be impacted by tariffs, said Daniel Zhao, lead economist at Glassdoor. “The stated goal of the tariffs is to boost domestic manufacturing, but the sector is also the most at risk from supply chain disruptions and cost increases,” he said. “The short-term outlook for manufacturing is likely a slowdown until the economic picture firms up and any reshoring benefits show up.”

A closer examination of the data reveals that employers are exercising caution across nearly all industries, Doyle said. “Our real-time data indicates a continued, slow decline in demand for open job postings, with a decrease of 2% in overall postings and 3% in new postings since last month.”

Unemployment Rises

The unemployment rate rose modestly in March, driven by more people entering the labor force. The unemployment rate has hovered between 4-4.2% since May 2024.

A broader unemployment indicator that includes those not looking for work as well as workers holding part-time jobs for economic reasons edged down to 7.9%.

“The increase in the unemployment rate was married with an increase in the labor force, mostly for younger workers,” Zhao said. “But for prime-age workers [ages 25-54], labor force participation and the employment-population ratio both fell. Prime-age labor force participation is at the lowest since January 2024.”

Wages

Average hourly earnings in March rose by 9 cents, or 0.3 percent, to $36.00. Wages increased 3.8% year-over-year in March, down from 4% in February and the lowest level since July 2024.

“Wage growth came in lower than expected, a welcome sign for employers concerned about rising compensation costs,” Ross said.