After last month’s surprising job losses, the U.S. labor market is largely expected to rebound in March, continuing to support the “low hire, low fire” narrative that is defining the economy.
Forecasters expect the jobs report, due on April 3, to paint a picture of a soft but stable labor market, with an estimated 57,000 additional jobs and the unemployment rate holding steady at 4.4%. This follows February’s shock, where 92,000 jobs were slashed across major sectors, in part due to harsh weather, healthcare strikes, and overall employer caution.
Even if February’s decline proves to be a fluke, the labor market has been in a continued cooldown from post-pandemic strength, where hiring surged. Weaknesses in cyclical industries, such as logistics and sectors that produce goods, will likely be offset by steady hiring in healthcare and social assistance roles that often act as buffers during economic turbulence. These cyclical industries have had nearly flat hiring in the past six months, marking an environment that is good for current workers but challenging for those trying to find a job.
February’s cold weather particularly hit hospitality, retail, and construction, but March numbers will likely show an uptick as temperatures rise. “We’re trying to see what the underlying trend is,” said Stephen Juneau, senior U.S. economist at Bank of America. “Do we see things like major hospitality bounce back? Retail trade bounce back? Construction bounce back? That would give us more clarity that February was depressed due to weather reasons.”
Even the drop in healthcare, which lost 32,000 jobs due to a major strike last month, was likely a blip in the data. Economists anticipate the industry to return to its role as a stable job creator, even if job creation stalls elsewhere. “Healthcare has been basically a printing press of jobs. And so we expect that we’ll get back to that,” said Tom Porcelli, chief economist at Wells Fargo.
Vulnerable demographics bear a disproportionate burden that could raise alarms about equity gaps widening. There are signs that the labor market could be eroding for groups that are often the first to be hit by shocks. The Black unemployment rate is almost at 8%, and long-term joblessness has climbed.
Meanwhile, the impact of AI’s threat to white-collar jobs has also hit headlines, as 22 to 27-year-old men with college degrees have a similar unemployment rate as men of the same age who don’t, eroding the traditional income premium that higher education provides. But economists say the evidence for the negative impact of AI beyond entry-level graduates is thin.
“AI has been a bit of a scapegoat so far,” said Juneau, as white-collar sectors have shown positive job growth with the adoption of AI. He suggests that the job market will see complementary effects before people are replaced, and historically, large-scale tech innovation results in reskilling, not eradicating jobs.
Revisions continue to erode confidence in headline numbers. Economists had predicted job growth of around 60,000 in December, slightly higher than the numbers initially reported, but revisions ultimately showed a flip from job gain to loss for the month. In total, last year’s job numbers were revised downward by 69%, or about 400,000 jobs.
Geopolitical repercussions, like the Iran war, likely won’t be seen in the job numbers yet. While families are paying more at the gas pump – with gas prices up about 26% year-over-year – the jobs survey conducted in mid-March probably won’t show a decline in jobs because of the conflict.
Friday’s report will test whether the labor market cooldown remains controlled or if it turns fragile.