US job growth topped all forecasts in March, suggesting the labour market was holding up well before President Donald Trump’s aggressive tariffs start making their way through the economy.
Nonfarm payrolls increased 228,000 last month in a broad advance, according to Bureau of Labor Statistics data out Friday. Downward revisions to the prior two months were modest, and while the unemployment rate rose, it was mostly a rounding error.
But the stronger-than-expected payroll gains — what normally might boost markets and optimism across the board — was doomed to fail to deliver that jolt from the start, as attention has turned toward the widespread tariffs that Trump announced earlier this week. Stocks continued to tumble on Friday, following the S&P 500’s worst day since 2020, and aggravated by retaliatory measures from China before the jobs data.
Many Wall Street economists now say the US risks a recession this year, including projections for higher unemployment and inflation. That puts the Federal Reserve in an even more challenging position, as policymakers may have to choose between cushioning the economy, which would suggest lower interest rates, or taming inflation by keeping borrowing costs high.
Chair Jerome Powell, who spoke later Friday, said the Fed doesn’t need to be in a hurry to act, but acknowledged that the economic impact of new tariffs is likely to be significantly larger than expected. The jobs data not only give Powell that breathing room to see how monetary policy should respond, but also offers Trump the space to enact an aggressive agenda.
See also: Wall Street titans blast Trump's tariffs with markets roiled
“March’s solid nonfarm payroll gains suggest neither President Donald Trump nor Fed Chair Jerome Powell will be in a hurry to offer support for the stock market after this week’s sharp, tariff-driven selloff,” Bloomberg economists led by Anna Wong said in a note.
Trump hailed the “GREAT JOB NUMBERS” on social media, and called on Powell to cut interest rates before the Fed chair’s speech. After Powell spoke, traders were less confident officials would cut at their meeting next month.
| Metric | Actual | Median estimate |
|---|---|---|
| Change in payrolls (m-o-m) | +228k | +140k |
| Unemployment rate | 4.2% | 4.1% |
| Average hourly earnings (m-o-m) | +0.3% | +0.3% |
See also: Traders are betting on five more Fed cuts on recession fears
Underlying details suggest some one-off factors were at play in the jump in payrolls. Leisure and hospitality employment climbed, likely a rebound from unusually bad weather earlier in the year. Retail employment bounced back as well, in part reflecting the resolution of 10,000 workers on strike at Kroger Co. And some economists suggested the jump in transportation and warehousing payrolls reflected companies’ efforts to rush goods into the country before tariffs kick in.
Health care and social assistance also posted notable gains.
Federal government payrolls posted the first back-to-back decline since 2022 as the Department of Government Efficiency moves forward with plans to shrink the federal workforce. The BLS noted that employees who are on paid leave or receiving severance pay are counted as employed.
DOGE’s efforts amounted to more than 280,000 planned layoffs of federal workers and contractors over the past two months, according to outplacement firm Challenger, Gray & Christmas.
Some forecasters say DOGE-related job losses could top half a million by the end of the year as the cuts spread to government contractors, universities, nonprofits and other adjacent sectors. Economists will also be looking to see how Trump’s immigration policies will impact the labour market as border crossings have essentially stopped.
Tariffs may also lead to more pronounced layoffs in the private sector. Stellantis NV, which owns brands including Ram and Chrysler, said it will temporarily lay off about 900 workers across affected sites, including at several US powertrain and stamping facilities.
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The jobs report is composed of two surveys — one of businesses, which produces the payrolls figures, and another of households, which publishes unemployment and participation. The household survey also has its own measure of employment, which climbed after falling in February by the most in over a year.
The unemployment rate — which ticked up to 4.15% from 4.14% on a two-decimal basis — rose for mixed reasons. On one hand, more people joined the labour force last month, which is good for employers seeking to fill millions of job openings. On the other, more people permanently lost their jobs.
Moreover, new entrants who were unable to find work rose to an eight-year high, corroborating surveys that show Americans’ frustrations with job searches. The share of employed people holding multiple jobs climbed to the highest since 2009, and the number of people who voluntarily quit declined by the most in almost a year.
The participation rate — the share of the population that is working or looking for work — ticked up to 62.5% in March, largely driven by people under the age of 24. The rate for workers of ages 25-54, also known as prime-age workers, slid to the lowest in over a year.
Economists are also paying close attention to how labour supply and demand dynamics are impacting wage gains — especially with inflation risks heating up again. The report showed average hourly earnings climbed at a firm pace from the prior month, but decelerated on an annual basis to the slowest rate since July.
Other data suggest the labour market is shifting into a lower gear. Job openings declined in February and are in-line with pre-pandemic levels, while data out Thursday showed hiring plans among small businesses fell last month to the lowest in nearly a year. Also, recent sentiment surveys have shown households are more pessimistic about their job prospects and financial situations due to tariffs.
“The outlook for the US labour market going forward is less sanguine than it was one month ago,” Wells Fargo & Co. economists led by Sarah House said in a note. “There already have been hints in the data that labour demand is cooling on trend, and this week’s policy developments add further weight to that argument.”
