U.S. job growth is anticipated to have improved in March after a healthcare workers’ strike ended and warmer weather returned, though the ongoing conflict in the Middle East is creating mounting challenges for the labor market. Economists expect this rebound to reflect a return to the slow growth pace seen last year.
The labor market has faced significant uncertainty, beginning with former President Donald Trump’s aggressive import tariffs. Just as some clarity emerged, the U.S. Supreme Court struck down these tariffs in February, which Trump had implemented under a national emergency law. In response, Trump imposed a global tariff lasting up to 150 days.
At the end of February, the U.S. and Israel launched strikes against Iran, causing global oil prices to surge by more than 50%, which in turn pushed domestic gasoline prices higher. This month-long conflict has added another layer of uncertainty for businesses, with economists predicting its negative impact on the labor market will become more apparent in the current quarter.
“Last year, tariffs were the main source of uncertainty affecting hiring,” said Sophia Kearney-Lederman, senior economist at FHN Financial. “This year, the focus has shifted to the Middle East conflict and rising oil prices.” The Bureau of Labor Statistics’ upcoming employment report is expected to show nonfarm payrolls rising by 60,000 jobs in March, following a 92,000-job decline in February, which was the sixth drop since January 2025 and the second-largest overall.
The unemployment rate is forecast to remain steady at 4.4%, although some economists predict it could edge up to 4.5%. While Good Friday is not a federal holiday in the U.S., some financial markets will be closed.
Approximately 31,000 nurses who had been on strike at Kaiser Permanente in California and Hawaii returned to work in late February, which should contribute to healthcare payroll growth in March. Healthcare continues to be a key driver of job growth, supported by demographic trends. Construction and leisure and hospitality sectors are also expected to see employment gains after weather-related declines earlier in the year.
However, job growth last month likely remained concentrated in a few sectors, including social assistance. Recent data from the BLS showed the largest drop in job openings in nearly 18 months during February, signaling weakening labor demand.
“Everything is progressing at a very slow pace amid considerable uncertainty, and deportations continue,” noted Ron Hetrick, senior labor economist at Lightcast.
Mass deportations under the Trump administration have further contributed to labor market stagnation by reducing labor supply, which negatively affects demand for goods, services, and workers. Economists estimate that historically low labor supply growth means fewer than 50,000 jobs per month are needed to keep pace with the working-age population, with some estimates suggesting the break-even rate could be zero or even negative.
JPMorgan economists warned that negative payroll numbers may become more frequent, stating that even with enough job growth to stabilize unemployment, monthly job losses could occur about a third of the time.
While March’s data may be too early to fully reflect the impact of the Middle East conflict, economists expect its effects to become clearer in April’s employment report. The national average retail gasoline price recently surpassed $4 per gallon for the first time in over three years, which will likely increase inflation, reduce household purchasing power, and dampen consumer spending despite wage gains.
Average hourly earnings are projected to have risen by 0.3% in March, translating to a 3.7% annual wage increase. The conflict in the Middle East erased roughly $3.2 trillion from the stock market in March, and Trump has vowed more aggressive strikes on Iran.
“Businesses are likely to adopt a defensive stance and reduce hiring for a period, possibly one or two months,” said Brian Bethune, economics professor at Boston College. “This cautious approach will probably be evident in April and May, making the outlook for the second quarter quite bleak.”
Economists agree that March’s employment figures will not influence the Federal Reserve’s interest rate decisions, as the economic effects of supply chain disruptions caused by the conflict are still unfolding. The likelihood of a rate cut this year has diminished significantly. The Fed maintained its benchmark overnight interest rate in the 3.50%-3.75% range last month.
Andrew Husby, senior economist at BNP Paribas Securities Corp., commented, “Unless layoffs increase, the current ‘low-hire, low-layoff’ environment is uncomfortable but sustainable and does not warrant pre-emptive Fed policy intervention.”
