March jobs report: Solid gains ahead of tariff turmoil

The latest jobs numbers are out from the U.S. Bureau of Labor Statistics. What do they mean for job seekers, employers and investors? Here’s a quick take from Glassdoor’s Lead Economist Daniel Zhao.

The job market logged solid job gains in March, according to the latest jobs report. The uptick in job gains is overshadowed, however, by the new tariffs announced at the beginning of April. The job market has been surprisingly resilient over much of the last five years but the latest data doesn’t tell us anything new ahead of the next challenge the job market will face in the form of new tariffs and policy uncertainty.

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Tariff turmoil tempers the short-term economic outlook

The March jobs report is overshadowed by the radical new tariff policy announced on April 2, but the report does offer a snapshot of what a pre-tariffs job market looks like.

The manufacturing sector is the most likely to be impacted by tariffs—the stated goals of the tariffs is to boost domestic manufacturing but the sector is also the most at risk from supply chain disruptions and cost increases. The manufacturing sector has actually contracted modestly over the last two years, losing 136,000 jobs (a 1% decline) since peaking almost exactly 2 years ago (February 2023).

The outlook for manufacturing is uncertain in the same way that the policy outlook is uncertain. Tariff policy has undergone many shifts over the last few months under the new administration, which has increased uncertainty for businesses. Business executives are caught in an uncertainty catch-22: if new tariffs stay in place, their scope risks slowing economic growth and making any investment unprofitable, but if the tariffs are walked back or negotiated down, then manufacturers who committed to reshoring may be caught holding the bag with now-unprofitable supply chains.

Additionally, fully reshoring production will likely take years and in the interim, short-term price increases are likely to be a drag on manufacturers. Many low-margin small businesses will be forced to raise prices or shut down once their inventories are drawn down. As a result, the short-term outlook for manufacturing is likely a slowdown until the economic picture firms up and any reshoring benefits show up.

The tariffs also carry additional risk beyond manufacturing. The impact could spread to other industries if cost-pressured American households have to pull back discretionary spending in leisure & hospitality or air transportation. Additionally, the Federal Reserve may be put in a stagflation double bind where they have no room to increase support for a slowing economy when tariffs are increasing prices.

Is a shrinking federal workforce an omen of slowing acyclical jobs growth?

Actions affecting the federal workforce range from a hiring freeze to layoffs of probationary workers to voluntary buyouts to outright layoffs to contract & grant cuts. It’s difficult to disentangle the impacts of these various actions on federal employment, but the most immediate impact is likely coming from the hiring freeze as attrition is not being replaced by new hiring.

Federal employment declined by 4,000 in March, following a decline of 11,000 workers in February. That already puts federal employment growth in line with private sector jobs growth post-Covid with both growing about 5% since February 2020. 

Some actions by the new administration are being challenged and reversed in court, so it’s difficult to project when and if, for example, probationary layoffs will show up in the jobs report. Over the next year, though, the federal workforce is indeed likely to shrink, which is significant in that hiring in acyclical sectors has helped support jobs growth over the last two years.

If these job losses spread to other sectors like state & local government, education and healthcare that drove a significant share of job gains in the last two years, the job market would need a significant acceleration in jobs growth from cyclical sectors to compensate. So far, that has borne out as slowdowns in hiring in government, education and healthcare have been offset by job gains in transportation & warehousing, finance, retail and manufacturing.

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Payrolls grew by 228,000 in March, well above expectations of about 130,000 jobs added. January and February were revised downward 48,000.

Private payrolls were up a healthy 209,000. Services-producing sectors drove the acceleration jumping from 90,000 jobs added in February to 197,000 in March.

Average hourly earnings grew 3.8% year-over-year in March, slower than expected.

Average weekly hours were also flat though remain below pre-Covid levels as businesses hold onto workers rather than lay them off but remain stingier with hours amid softer economic demand.

The unemployment rate rose to 4.2% in March. The unemployment rate has hovered between 4-4.2% since last May.

The higher plateau in the unemployment rate since May means the threshold to trigger the Sahm rule (a prominent recession indicator) again has been rising too—no red alert from the Sahm rule right now.

The increase in the unemployment rate was married with an increase in the labor force, mostly for younger workers. But for prime-age workers (25-54), labor force participation and the employment-population ratio both fell. Prime-age labor force participation is at the lowest since January 2024. Both prime-age labor force participation and the employment-population ratio are at relatively strong levels by 21st century standards, but are worse than the mid-2024 highs.

Black and Asian unemployment rose in March, mostly reversing their drops in February. Note: This is a useful reminder that month-to-month unemployment rates by demographic group are volatile due to their smaller sample size.

To speak with Daniel Zhao about this report, please contact pr@glassdoor.com.