A late Spring freeze

March 30, 2026

Payroll employment is expected to add a meager 45,000 jobs in March, as a major strike in the healthcare sector is resolved. The downside is the dearth of hiring elsewhere in the economy. Public payrolls are expected to remain subdued with few net new hires. 

Recent surveys on manufacturing showed some improvement in orders but little appetite to hire. A strike in the meat processing industry, covering about 3800 workers and about 5% of the meat processing capacity, is ongoing and will likely provide an additional damper to the manufacturing sector. Firms are relying on doing more with less instead of adding head count. 

The March payroll report will be too early to show the effects on employment from the recent surge in energy prices and spillover effects. Those and the supply chain disruptions due to the war in Iran will cumulate. Uncertainty about the war has picked up, which will only add to hiring freezes. That in and of itself will be a headwind to payroll growth as we move into Spring. 

Average hourly earnings are expected to rise by 0.4% in March, buoyed by pockets of labor market shortages. Burnout and the loss in immigrant workers are hitting the care economy, which is driving overall economic gains, particularly hard. Rural and poor urban hospitals rely disproportionately on H-1B visa recipients. A hike in the cost of new H-1B visas is too much for nonprofits to bear, which is adding to labor shortages in that subsector even as demand for care continues to soar.  

Wages in warehousing and transportation, public utilities and for the narrow pool of AI talent have soared as well. The freight sector has gone through massive consolidation in recent years. Many smaller owner operators went out of business, while new restrictions on immigrant labor are limiting the supply of long-haul drivers. 

The surge in wages in the utilities and AI talent represent the data center boom. Utilities have begun to force those asking for more energy for data centers to guarantee the funding for energy costs. Those restrictions were already prompting many to scale back their requests. The surge in energy costs will likely sideline speculators and could take some of the froth off the top of the data center boom. 

Separately, the unemployment rate is expected to hold at 4.4% in March. We need very few (if any) new jobs to hold the unemployment rate unchanged. The shutdown of the government was shorter this time than in the fall but likely prompted some unpaid government workers to quit or take on second part-time jobs to compensate for the repeated disruptions to their paychecks. The collateral damage of those shifts prompted a rise in those on temporary layoffs last Fall. 

The unemployment rate among new college graduates is expected to continue its upward march. Those who lose a job continue to struggle to replace it and are spending more time unemployed. The low overall unemployment rate is masking the underlying pain and job insecurity showing up in the consumer attitude surveys.  

The labor market entered a new phase last year. The demand and supply of workers fell simultaneously, which left those seeking work locked out and those in a job feeling increasingly trapped. Worse yet, the few net job gains we saw became more concentrated in just one sector – healthcare and social assistance. Absent gains in that sector, we would have shed jobs in 2025. Job losses became more dispersed, with more sectors shedding than adding jobs on the margin, either via attrition, hiring freezes or small-scale layoffs. 

The question is what we can expect of the labor market this year. The war in Iran has already disrupted the flow of oil and caused a larger shock to the oil supply than war in Ukraine in 2022. If it continues, it could easily swamp the losses due to the OPEC embargo of 1973, an existential threat that financial markets have been slow to absorb.