US job growth is likely to pick up in March, as war casts a shadow over the labor market

WASHINGTON, April 3 (Reuters) – U.S. job growth may have picked up in March as a health workers’ strike ended and temperatures warmed, but risks to the labor market continued to increase due to the ongoing war in the Middle East.

The slowdown is expected to reverse last year’s growth rate, economists said. The labor market has been plagued by uncertainty, starting with President Donald Trump’s aggressive tariffs. Just as some of the clouds began to clear, the US Supreme Court in February struck down the jobs Trump had sought under a law meant to be used in national emergencies.

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“We’ve seen this over the past year, uncertainty putting businesses behind when it comes to hiring,” said Sophia Kearney-Lederman, senior economist at FHN Financial. “Last year, the biggest uncertainty was around rates. ⁠This year, it’s about what the conflict in the Middle East and rising oil prices will mean.”

The closely watched jobs report by the Bureau of Labor Statistics on Friday will likely show non-farm payrolls increased by 60,000 jobs last month, a Reuters poll of economists predicted. The economy fell by 92,000 jobs in February, the sixth largest since January 2025 and the second largest.

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

About 31,000 Kaiser Permanente nurses in California and Hawaii returned to work in late February, which should boost health care wages in March. Health care has been the main pillar of job growth and economists expect it to remain so, citing demographic changes.

A rebound in construction activity as well as leisure and hospitality earnings is also expected after a decline caused by poor winter weather.

“Everything is moving at a snail’s pace, there’s a lot of uncertainty, and we’re laying people off,” said Ron Hetrick, senior labor economist at Lightcast.

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

Some estimates put the break rate at zero or negative. Economists at JPMorgan warned that “negative earnings numbers in any given month will be very common,” adding that “even if there is enough job growth to stabilize the unemployment rate, there could be negative earnings numbers at least a third of the time.”

While March may have been too late to catch the fallout from the Middle East war, some economists said that could be seen as soon as the April jobs report comes out. The average price of gasoline in the country this week rose to $4 a gallon for the first time in more than three years.

This will feed into higher prices and erode the purchasing power of households, reduce other potential for income growth, and reduce spending.

Average hourly wages are estimated to have gained 0.3% last month, which would translate to an annual increase of 3.7% in wages.

Brian Bethune, an economics professor at Boston College, said: “Businesses are going to get discouraged and go back to the basement at some point.” “My guess is that the time is probably one or two months. So we’ll probably see that in April and May. The outlook for the second quarter is not good.”

The March jobs report will not have any impact on the interest rate outlook, economists said, with the effects of the conflicting supply chain continuing to affect the economy.

The chances of a rate cut this year are very slim. The Federal Reserve left the overnight interest rate in the 3.50%-3.75% range last month.

“In the absence of work, we see a ‘low employment, unemployment’ balance that is uncomfortable but sustainable and does not require Fed policy support ahead of action,” said Andrew Husby, senior economist at BNP Paribas Securities Corp.

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