U.S. job growth beat forecasts in March in a broad advance, pointing to a resilient labor market before the global economy gets hit by widespread tariffs.
Nonfarm payrolls increased 228,000 last month after downward revisions to the prior two months, according to Bureau of Labor Statistics data out Friday. The figure exceeded all estimates in a Bloomberg survey of economists.
The unemployment rate ticked up to 4.2% as the participation rate climbed. Pay gains were firm.
Stock futures and Treasury yields remained lower after China responded with retaliatory tariffs on U.S. imports. Traders still see about 50% probability of a quarter-point rate cut at the Fed’s meeting next month and have priced in four reductions by year-end.
The report points to a healthy labor market before the brunt of President Donald Trump’s across-the-board tariffs on Wednesday, which have tanked global financial markets and upended forecasts for a continued expansion in the world’s largest economy. Many Wall Street economists now say the US risks a recession this year, including projections for higher unemployment and inflation.
Those expectations put 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 is due to speak later Friday.
The advance in payrolls was led by health care and transportation and warehousing. Leisure and hospitality employment also 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.
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 labor market as border crossings have essentially stopped.
Tariffs may also lead to more pronounced layoffs in the private sector. Stellantis, 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.
Separate surveys
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 went up for mixed reasons. On one hand, more people joined the labor 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 labor 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 labor 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.
