US Job Growth Rose Unexpectedly in March

U.S. employers reported adding 178,000 jobs in March, defying much lower forecasts, and the unemployment rate dipped to 4.3%, according to the latest employment report from the U.S. Bureau of Labor Statistics (BLS).

“March’s job gains greatly exceeded expectations, signaling the labor market is rebounding following February’s disruptions,” said Joshua Smith, senior vice president at Adecco.

The figure represents above-trend job growth for a labor market that created an average of 15,000 jobs each month over the past six months. The economy was adding 78,000 jobs on average each month during the same period one year earlier.

“The U.S. added a whopping 178,000 jobs in March, despite the Iran war raising energy prices and spooking financial markets,” said Andrew Flowers, chief economist at Appcast. “Recent months have had unusually large swings in employment, a choppy trend that obscures baseline conditions of a low-hire, low-fire labor market.”

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Ger Doyle, regional president, North America at ManpowerGroup, said that the report’s stronger than anticipated job gains offer “an early signal that employers may be moving ahead with hiring plans more decisively than earlier in the quarter. Our data shows a labor market gradually regaining its footing. While many job seekers may not be feeling the shift yet, more sectors are beginning to open roles again as hiring activity steadies,” he said.

Although payrolls trended in a positive direction last month, the labor market’s choppy momentum over the past six months suggests job creation still remains highly concentrated and vulnerable to further volatility, said Noah Yosif, chief economist and head of research at the American Staffing Association. “While escalating tensions with Iran didn’t disrupt hiring in March, a prolonged conflict involving the Strait of Hormuz could drive up transportation costs and curb hiring in goods-producing sectors,” he said.

The report shows encouraging signs of momentum, Doyle said, even in a labor market that feels sluggish. “However, today’s report largely reflects data gathered before the latest geopolitical tensions escalated,” he said. “Deepening geopolitical risk and higher energy prices create real uncertainty about what comes next. Historically, sectors such as manufacturing, transportation, retail, and hospitality have been most sensitive to global shocks, and we will be watching these areas closely.”

Immigration restrictions, higher energy prices, and economic and geopolitical uncertainty have all been factors impacting business confidence and hiring plans over the last 15 months, resulting in a generally frozen labor market.

Glassdoor Chief Economist Daniel Zhao noted that the strong jobs report overall alleviates pressure on the Federal Reserve to act immediately and instead lets them look ahead to prepare for the impacts of the war in Iran and rising energy prices, which are likely to push prices higher and slow the job market.

And while the headline numbers are stronger than expected, “a peak under the hood presents a shrinking labor force and continued challenges for those looking for work,” said Nicole Bachaud, labor economist at ZipRecruiter. “Changing immigration trends are leading to lower labor force participation, as the native-born population continues to see a falling participation rate,” she said. “Fewer workers are waiting out long unemployment stints, leading to more discouraged and marginally attached workers. An increase in job opportunities could bring many of these would-be workers back to the market, but it might not be enough to counteract the impacts of both shrinking immigration and an aging workforce.”

The St. Louis Federal Reserve recently estimated that the economy needs to add as little as 15,000 jobs monthly to keep the unemployment rate steady, due to the shrinking labor supply.

“The word resilience gets thrown around a lot, but it’s merited,” Flowers said. “Despite the rollercoaster readings of recent months, the underlying labor market trends over the past year have remained intact. Job growth is slowing, yes, but not in freefall, thanks to health care. And despite hiring being weak, layoffs haven’t materially increased.”

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Industry Breakdown

As has been the case in recent years, health care was responsible for much of the employment growth in March, with the sector adding 76,000 jobs.

The BLS said ambulatory health care services rose by 54,000 jobs, with 35,000 coming from striking workers at health-care provider Kaiser Permanente returning to work.

“Health care, which continues to be a consistent driver of job growth, led gains last month as workers returned from strike activity in physicians’ offices, while construction and transportation and warehousing also contributed to overall growth. Hiring continues at a measured pace, with gains concentrated in a few key sectors,” Smith said.

Zhao said that it’s likely that health care employment growth will continue in the medium-term, regardless of whether the economy slows even further. “Even during the Great Recession, health care added jobs on a monthly basis without a single month of job losses as the economy overall shed 410,000 jobs on average monthly,” he said.

The rebound in jobs in March is also likely due to an improvement in the weather conditions from February, which helped the construction industry add 26,000 jobs, and leisure and hospitality employers produce 44,000 jobs.

“Leisure and hospitality reported the largest monthly gain seen in the last two and a half years, despite soaring gas prices,” Bachaud said. “Consumer sentiment and spending remain strong, giving the service industries a boost amid a backdrop of uncertainty. Construction added jobs as demographic demand for housing and increased demand for data center builds continue to prop up growth in this industry.”

She added that the federal government continued to shed jobs, now down 355,000 since October 2024. Manufacturing employment rose by 15,000.

Flowers noted that focusing on just the private sector reveals a gain of 186,000 jobs last month. “Overall, the story of hiring remains that health care and construction are the main drivers of job growth. Every other industry is flat or down,” he said.

Unemployment Dips

The unemployment rate has stayed low even as job growth has cooled, moving between 4% to 4.5% over the past year. The dip in the unemployment rate in March comes mainly by way of the labor force shrinking by nearly 400,000 people. The share of Americans working or looking for work slipped to 61.9%, its lowest level since the fall of 2021.

“The unemployment rate dropped, but was masked by a reduction in new entrants and reentrants to the labor market, with fewer people looking for work for the first time, or for the first time in a long time,” Bachaud said. “A lack of turnover, with the ‘low-hire, low-fire’ environment, is leaving few opportunities for people to break in.”

An alternative unemployment figure that counts discouraged workers and those holding part-time jobs for economic reasons rose to 8%. Long-term unemployment continued to be elevated, though the average weeks of unemployment fell to 25.3, likely as many choose to exit the market, Bachaud said.

“A lack of job opportunities is pushing many unemployed workers out entirely, making unemployment a permanent position for many rather than a temporary state,” she said.