What to expect from the March jobs report – even if the war could hit hiring | CNN Business

The March jobs report, due out on Friday morning, could provide a much-needed reality check after two months of turmoil in the US labor market.

But even if a baseline can be reached, and there is clarity about the health of the labor market, it’s a whole new ball game now.

The conflict in the Middle East, which looks set to continue into its sixth week, and the lack of supply from the closed Strait of Hormuz, is causing shockwaves around the world.

Americans saw an immediate increase in sugar prices; businesses watched transportation costs skyrocket; and fears have grown that the fallout from the war could quickly affect the economy.

The escalating conflict, which began when the US and Israel launched an attack against Iran on March 28, is not expected to have a major impact on March employment figures.

The research that supports the report is done in the middle of the month, so it may take the first part of the battle. Moreover, economists did not expect any immediate negative effects, noting that uncertainty could result in the suspension of hiring plans versus job cuts.

That could change, though, giv.st the duration and extent of the war.

The US economy may have added 60,000 jobs last month and the unemployment rate was held at 4.4%, according to FactSet consensus estimates.

That would mark an improvement from the surprise loss of 92,000 reported in February but half the size of January’s stronger-than-expected earnings estimate of 126,000.

There are several ways to limit volatility:

Considering the above (and factoring in that strike-related growth), a gain of 60,000 jobs in March would reflect some conditions, Lydia Boussour, chief economist at EY-Parthenon, wrote in a note to investors on Tuesday.

He expects sectors affected by the weather such as construction, transportation and retail sectors to show some growth in activity.

But the industry that will contribute for the month will be health care, which shed 28,000 jobs in February after holding steady job gains, he said.

“We’ll be watching closely to see whether May delivers a clean transition from the strike, which temporarily cut 31,000 workers from paying wages, or whether the industry’s ability to sustain job growth before it begins to fade,” he wrote.

The US labor market has been at a low, fire-low hiring level for more than a year, and that strength is not expected to have changed much in March.

Jobless claims, a closely watched indicator of retirement activity, have been surprisingly flat in recent weeks, Labor Department data show. Last week, first-time claims for jobless benefits fell by an estimated 202,000 people, falling near 2026, according to new Labor Department data released Thursday.

Also, the first quarter of 2026 had the fewest job announcements since 2022, new data from Challenger, Gray & Christmas showed.

However, Challenger’s latest job cuts report released on Thursday not only showed that announced jobs increased in March, but also highlighted the growing role that artificial intelligence is playing in employment decisions.

Of the 60,620 proposed tests announced in March, AI was cited as the reason for 15,341 of them.

Andy Challenger, chief revenue officer at outsourcing services firm Andy Challenger, said: “Job replacement can be seen in technology companies, where AI can replace coding jobs.” Other industries are testing the limits of this new technology.

“And while it won’t completely replace jobs, it does destroy jobs,” he added.

To that end, AI could play an even bigger role in labor decisions if the war continues and energy prices remain high, said Audrey Guo, an assistant professor of economics at Santa Clara University’s Leavey School of Business.

“It is true that during recessions or recessions, some companies have the opportunity to reinvent or try new things, because there is not much to lose,” he said in an interview with CNN. “If they are faced with high prices and the need to reduce costs, one way they can try to reduce labor costs is through the adoption of AI.”

And no industry will be immune to rising costs, Joe Brusuelas, chief economist at RSM US, told CNN.

“Energy affects every family,” he said. “No single industry or sector will be spared.”

Skyrocketing oil prices and sudden shortages of essential resources such as fertilizer can quickly permeate the economy and cause all kinds of goods and services to rise in price while reducing valuable household income.

Brusuelas earlier this week detailed a map of possible “demand destruction,” a term for what happens when higher prices force businesses and consumers to spend less.

Discretionary spending is often the first, and restaurant activity can begin, said Dean Baker, senior economist and co-founder of the Center for Economic and Policy Research.

Restaurant revenue has increased modestly, driven in part by high-net-worth households whose wealth has been boosted by strong stock markets, Baker wrote in a letter this week.

He wrote: “With the stock market falling sharply after the start of the war, families with more money are likely to cut back on spending.” “Since restaurants are the only major source of job growth outside of health care and social assistance, this is not a good sign for the labor market.”

As confidence continued, consumers became less likely to make big-ticket purchases, Brusuelas said. And when diesel remains above $5 a gallon and raises shipping costs, businesses – especially transportation, manufacturing and agriculture – are cutting back on investment and their workers, he added.

“We have revised our estimate of unemployment to 4.7% this year from 4.3% due to the shock,” he said. But we can’t expect to see it until the middle of the year.