Employers added 178,000 jobs in March, notching a strong gain for a vulnerable labor market that faces even more challenges ahead as energy prices soar due to the conflict in Iran.
The unemployment rate edged down to 4.3 percent, according to data released Friday by the Labor Department.
The March jobs report, which blew past expectations, marks the first major release of economic data that reflects the period after the start of the war with Iran, which is weighing on households and businesses. This week, gas prices at U.S. pumps spiked above $4 a gallon for the first time since the summer of 2022.
February job losses were revised down showing the labor market shed 133,000 positions that month, which was worse than initially reported. However, January job creation was revised up to 160,000, stronger than initially reported.
Forecasters had predicted that the economy had added 59,000 positions in March, partially buoyed by jobs gained that were temporarily lost during health care strikes in the winter.
Before the U.S.-Israeli assault on Iran, the jobs market was flashing warning signs. Employers job cuts in February reflected the winter weather challenges as well as health care strikes. In February, the pace of hiring slumped to its lowest level in nearly six years and job openings fell by more than 350,000, according to a separate labor market report released Tuesday.
For the past year, health care and social assistance — fueled by an aging population — have been buoying the entire labor market. Elsewhere, hiring has remained at a standstill. Manufacturing, retail and white-collar industries have shown little growth or lost jobs as employers face uncertainty related to higher interest rates, tariffs, artificial intelligence and the availability of immigrant workers.
Wage growth continues to beat inflation, in a boost to Americans’ standard of living. But with a weakening labor market and stubbornly high prices, that gap has begun to narrow.
“We’re converging on a point where soon workers are going to feel like they have less money at the end of the day because wage growth is just not going to be able to keep pace as businesses are cutting back,” said Nicole Bachaud, labor economist at ZipRecruiter.
Despite the weakest job creation in years, the labor market has avoided widespread layoffs. In addition to sharply reduced immigration, a flood of baby boomer retirements has meant that little job creation is needed to keep the unemployment rate steady. The highly unusual situation for the United States has drawn parallels to countries with weak population growth due to aging and low birth rates, such as Japan and Italy.
“There’s zero net job creation in the private sector,” Powell said at a March 18 news conference. “But actually that looks like that’s about what the economy needs in terms of dealing with very, very low — nonexistent, really — growth in the labor force.”
Indeed, data on job losses remains stable. New filings for unemployment insurance ticked down to the lowest level last week since the start of 2026, according to separate data released Thursday by the Labor Department. And layoffs remain low, despite an increasingly grim labor market for those who are looking for work, especially African Americans and young people. In other positive news, consumer confidence ticked up in March despite soaring oil prices.
Still, hiring can only slow so much before the labor market collapses, economists say.
“The biggest impact that we could see given the information we have right now is going to be energy and gas prices remaining elevated,” said Bachaud. “Those things are going to impact consumer spending and sentiment and business input costs as transportation costs increase. And all of that is likely to lead to a slowdown in hiring.”
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