US employment growth likely rebounded in March amid Iran war

WASHINGTON: U.S. job growth likely rebounded in March as a strike by healthcare workers ended and temperatures warmed up, but downside risks to the labor market are mounting from the dragging war ​in the Middle East.

The anticipated bounce back will be a reversion to last year’s near stall-speed growth pace, economists said. The labor market has been buffeted by ‌uncertainty, starting with President Donald Trump’s aggressive import tariffs. Just as some of the clouds were starting to clear, the U.S. Supreme Court in February struck down the duties, which Trump had pursued under a law meant for use in national emergencies.

Trump, however, responded by imposing a global tariff for up to 150 days. At the end of February, the U.S. and Israel launched strikes against Iran, sending global oil prices soaring more than 50%, and boosting domestic gasoline prices. ​Economists said the month-long war added another layer of uncertainty for businesses, and they expected the hit on the labor market this quarter.

“We saw this last year, uncertainty puts businesses ​on the back foot when it comes to hiring,” said Sophia Kearney-Lederman, a senior economist at FHN Financial. “Last year, the big uncertainty was around tariffs. ⁠This year, it’s around what the conflict in the Middle East and rising oil prices will mean.”

The Bureau of Labor Statistics’ closely watched employment report on Friday is likely to show nonfarm payrolls ​increased by 60,000 jobs last month, a Reuters survey of economists predicted. Payrolls dropped by 92,000 jobs in February, the sixth decline since January 2025 and the second-largest.

The unemployment rate is forecast unchanged at ​4.4%, but some economists believe it could rise to 4.5%. Good Friday is not a federal holiday in the United States, though some financial markets are closed.

About 31,000 striking nurses at Kaiser Permanente in California and Hawaii returned to work in late February, which should boost healthcare payrolls in March. Healthcare has been the main pillar of job growth and economists expect it will remain so, citing demographic shifts.

A rebound is also expected in construction employment, as well ​as leisure and hospitality payrolls after declines that were blamed on harsh winter weather.

Job growth last month was likely confined to a few industries, including social assistance. Data from the BLS this week ​showed job openings decreased by the most in nearly 1-1/2 years in February, pointing to slipping labor demand.

“Everything is just moving at a snail’s pace, lots of uncertainty, and we are still deporting people,” said Ron Hetrick, a ‌senior labor ⁠economist at Lightcast.

HISTORICALLY LOW LABOR SUPPLY GROWTH

Mass deportations by the Trump administration have also contributed to labor market paralysis, economists said, by reducing supply, which ultimately hurts demand for goods and services, and workers. Historically low labor supply growth means less than 50,000 jobs per month were needed to keep up with growth in the working-age population, economists estimated.

Some estimates have put the break-even rate at zero or even negative. Economists at JPMorgan cautioned that “negative payroll readings in any given month will become more common,” adding that “even with job growth sufficient to stabilize the unemployment rate, there could be negative payroll readings at least ​a third of the time.”

While March was probably too ​early to capture the fallout from the ⁠Middle East conflict, some economists said that could become evident as soon as April’s employment report. The national average retail gasoline price this week topped $4 a gallon for the first time in more than three years.

This will feed through to higher inflation and erode households’ purchasing power, offsetting some of the ​strength in wage growth, and slowing spending.

Average hourly earnings are forecast to have gained 0.3% last month, which would translate to a 3.7% annual ​increase in wages.

The war ⁠wiped out about $3.2 trillion from the stock market in March. Trump on Wednesday vowed more aggressive strikes on Iran.

“Businesses are going to hunker down and go back in the bunker for a period of time,” said Brian Bethune, an economics professor at Boston College. “My guess is that period will likely be one or two months. So we will probably see that in April and May. The prospects for the second quarter are just not ⁠good.”

March’s employment report ​will not have any impact on the interest rate outlook, economists said, with the effects of supply chain disruptions from ​the conflict still to work their way through the economy.

The odds of a rate cut this year have greatly diminished. The Federal Reserve left its benchmark overnight interest rate in the 3.50%-3.75% range last month.

“Absent a pickup in layoffs, we see the ‘low-hire, ​low-layoff’ equilibrium as uncomfortable but sustainable and one that doesn’t call for pre-emptive Fed policy support,” said Andrew Husby, a senior economist at BNP Paribas Securities Corp.