Rebound far exceeds expectations! The U.S. added 178k new non-farm jobs in March, reaching a new high in over a year, and the unemployment rate unexpectedly dropped to 4.3%!

Ask AI · How do low hiring and low layoffs reflect underlying economic structural issues?

The U.S. labor market rebounded strongly in March, far exceeding market expectations, but the impact of the Iran war has not yet been fully reflected in the data, and deep structural concerns in the employment market still remain.

Data released by the U.S. Bureau of Labor Statistics on Friday show that non-farm employment increased by 178k in March, well above the 65k forecast by Bloomberg economists, marking the largest monthly gain since the end of 2024. Employment in February decreased by 92k (revised down to a decline of 133k).

It is noteworthy that the combined non-farm employment for January and February was revised downward by 7k, slightly lowering the base for the first two months.

Meanwhile, the unemployment rate in March fell to 4.3%, below the expected 4.4%, and also better than the previous 4.4%.

After the data was released, the market responded immediately. The dollar index surged more than 10 points in the short term, reporting at 100.12; U.S. 10-year Treasury yields also rose, now at 4.351%. Due to the Good Friday holiday, the U.S. stock market was closed that day.

Main reasons for the rebound: end of strikes and warming weather

The significant rebound in March employment data was foreshadowed.

The unexpected decline in February employment data mainly stemmed from strikes by over 30k Kaiser Permanente healthcare workers in California and Hawaii, combined with severe winter weather.

As these strikes were resolved in March, employment in the healthcare sector saw a significant rebound, becoming the largest contributor to job growth that month. Employment in construction and leisure & hospitality also rebounded, generally reflecting seasonal recovery effects due to improved weather.

The impact of the war has not yet manifested, and the Federal Reserve remains focused on inflation

Despite impressive data, analysts suggest that the March report has limited reference value for assessing the impact of the Iran war.

The data collection by the Labor Department occurred around mid-March, about two weeks after the war broke out; moreover, many companies plan their hiring months in advance. The substantive impact of the war on the employment market is expected to gradually appear in subsequent monthly data.

The rapid rise in energy prices triggered by the Middle East situation is reinforcing the Fed’s vigilance on inflation risks. Strong employment data will further solidify the Fed’s stance of prioritizing inflation control and maintaining policy stability at this stage.

Structural concerns: deadlock of low hiring and low layoffs

Although the unemployment rate remains low, the overall employment market still shows a stagnation of “low hiring and low layoffs.” Workers have a certain sense of job security, but job seekers often face a situation of many applicants and few positions.

Laura Ullrich, Director of Economic Research at Indeed, said, “If you’re looking for a job in business, finance, or tech, it’s really difficult to find a position right now.”

From an industry structure perspective, the healthcare and social assistance sectors have been nearly solely supporting the overall employment market in recent months — as of February this year, this sector added about 700k jobs over the past 12 months; excluding this sector, the rest of the economy saw a net decrease of about 500k jobs during the same period.

Tightening immigration policies have compressed the labor supply, lowering the “break-even” employment growth threshold

The unemployment rate remains low despite slowing employment growth, mainly because the Trump administration’s tightening of immigration policies has reduced the labor supply. Less supply means employers do not need to create as many jobs as before to keep the unemployment rate stable.

Economists are divided on the current “break-even” employment growth threshold: some believe that thousands of new jobs are still needed each month to prevent the unemployment rate from rising, while others think that even with moderate contraction in the job market, it will not lead to more willing workers becoming unemployed.

However, there is broad market consensus that during the Trump administration, this threshold had been significantly lowered.

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