Pre-war rebound in jobs not likely to last

April 3, 2026

The March payroll survey taken the week of March 12 largely reflects decisions to hire made prior to the start of the war. Layoffs remained subdued in March with initial unemployment claims dropping to two-year lows in recent months. 

Employers added 178,000 jobs during the month, after shedding a downwardly revised 133,000 in February. That is above the -20,000 to 40,000 range considered breakeven for payrolls to hold the unemployment rate steady. Hence, the drop in the unemployment rate to 4.3 from 4.4% in February; it is unlikely to stay there. 

The public sector continued to shed 8,000 jobs. Another sharp decline in federal employment more than offset a small gain in local hiring. State governments shed jobs as well. Government workers tend to be older than the population. Funding cuts and a surge in the ranks of baby boomers hitting retirement contributed to the losses. We saw new reports that between 450-500 TSA workers quit during the month in response to yet another government shutdown. We have shed 355,000 federal jobs since the peak in October 2024.

Job gains were more broadly distributed than in recent months. Healthcare and social assistance added 89,900 jobs. Some of that jump reflected a rebound from the strike in the healthcare sector in California and Hawaii last month as 27,000 workers returned to work. Leisure and hospitality added 44,000 jobs, mostly in accommodation and food services.

Construction added 26,000 jobs as temperatures in the South returned to seasonal norms. Those gains were concentrated in specialty residential contractors. Manufacturing added 15,000 jobs in durable goods manufacturing, mostly in fabricated metals and transportation. Aircraft manufacturing has finally recovered to normal levels after a series of setbacks in 2024 and 2025. A strike in the meatpacking industry of 3,800 workers held nondurable goods manufacturing employment in check. 

Average hourly earnings rose a tepid 0.2% month-over-month and gained 3.5% from a year ago. That marks a cooling from the 3.8% annual pace for February. Gains in construction, manufacturing, mining, finance and tech offset weakness in private education and health services. 

Hours worked fell to 34.2, down one-tenth of a percent from February. That pushed weekly earnings into the red by a tenth. The loss is larger after adjusting for inflation, which will doubt rise on higher energy prices. Prices at the gas pump rose 20% in March. 

Separately, the drop in the unemployment rate was driven in part by yet another decline in labor force participation. Losses were driven by 25–54 year-old men, 20-24 year-old women and men over 55. 

The fall in the overall unemployment rate was across the board. The only exception was job leavers, a category that picked up slightly. The ADP report suggested that the pay premium for job hoppers picked up a bit. The length of unemployment remained longer than usual; the mean for unemployment is 25.3 weeks. That compares to a mean of 21.7 weeks in 2019. 

The U6, which includes discouraged workers and those taking part- instead full-time for economic reasons, edged higher to 8.0% from 7.9% in February. Those gains were due to a jump in discouraged workers, or those who have not looked for a job in the last month.

The bigger picture 

The job openings and labor turnover survey, which reflects labor market conditions in late February, was worrisome. Churn, or turnover in the labor market plummeted and is hovering close to the all-time lows hit in the wake of the 2008-09 global financial crisis. Those who have a job are insecure that they may lose it, while those without a job cannot get a foot in the door.

Quits remained subdued while job openings continued to plummet. I cannot even count anymore the number of new graduates who have told me of being ghosted by prospective employers. The only upside was the layoff rate, which remained low but that could change in an instant. 

The private sector ADP report tracked closer to a three-month moving average. It showed a gain of 62,000, off only slightly from 68,000 in February. That data covers about 26 million private sector paychecks. Gains in small business hiring, which weakened in 2025, showed signs of picking up. Those are among the most vulnerable from spillover effects due to the war in Iran.