Unemployment Falls To 4.3% And Economy Adds 178,000 Jobs

The March employment report was far better than most analysts had anticipated as the unemployment rate fell to 4.3 percent, while the economy added 178,000 jobs, the most since it added 237,000 jobs in December of 2024. The household survey also showed a positive picture, with the drop in the unemployment rate, although this story is slightly more ambiguous since it went along with a small drop in employment and the employment-to-population ratio (EPOP).

It is important to note that both surveys were fielded in the middle of the month, with the 12th as the center point. This means that the impact of the war and higher fuel prices will be limited.  

Job Growth Was Widespread Across Sectors

While the health care and social assistance category accounted for more than half of March’s job growth, with 89.900 new jobs, most sectors added jobs in March. (Returning strikers accounted for 30,000 of this growth.) Construction added 26,000 jobs after losing 13,000 in February. Employment in the sector is up 57,000, or 0.7 percent, year-over-year. 

Restaurants added 21,500 jobs after losing 26,200 in February. Higher gas prices will likely hit restaurant spending, which we may already be seeing. Hours worked in the sector fell 0.6 percent in March. 

Manufacturing added 15,000 jobs, the largest increase since a 22,000 rise in November of 2023. Employment in the sector is still down 75,000 year-over-year (YOY). Interestingly, trucking employment is on a downward path. The sector lost 0.8K jobs in March and employment is down 27,300 (1.8 percent) over the last year.

Retail added 9,700 jobs, but employment is down by 29,600 YOY. Local governments added 14,000 jobs, pushing employment 135,000 above year-ago levels. Federal and state governments lost 18,000 and 4,000 jobs, respectively. Federal employment is now down by 352,000, or 11.7 percent, since President Trump took office.

Scientific Research and the Motion Picture Industry Continue to Lose Jobs

Jobs in the scientific research and development services category fell 0.9k in March and are now down 2.3 percent YOY. The motion picture industry also continues to shed jobs, losing 1.1k in March. Employment in the industry is down by 104.8k, 26.0 percent, from its peak in November 2022. 

Wage Growth Slowed in March

The year-over-year rise in the average hourly wage slowed 3.5 percent in March. With inflation turning higher due to the rise in fuel prices and other war-related increases, this will leave workers barely ahead, if at all. The increase for production and non-supervisory workers was just 3.4 percent.

With the index of aggregate hours falling by 0.2 percent for the month, average weekly earnings actually fell by 65 cents in nominal terms. But the monthly data on hours are highly erratic, so this drop does not necessarily mean much.   

Household Survey Is Mostly Good News

The drop in the unemployment rate at least temporarily reduces concern that unemployment is on an upward trend, although the impact of the war and higher energy prices could change that story. As noted earlier, it was accompanied by a small drop in employment, so the picture is a bit ambiguous. For prime age workers (ages 25-54) the EPOP was unchanged at 80.7 percent, 0.2 percentage points below the recovery peak of 80.9 percent reached in several months in 2023 and 2024.

Unemployment Rates for Black Workers and Young People Fall

The unemployment rate for Black workers fell from 7.7 percent in February to 7.1 percent in March. It had been up to 8.2 percent in November. This is still well above the 6.2 percent rate from January of 2025, and well above the 4.8 percent recovery low hit in April of 2023.

The unemployment rate for young workers (ages 20-24) fell from 7.4 percent to 6.4 percent, reversing the rise in 2025. However, this may be partly a story of people giving up looking for jobs. The EPOP for this group fell from 66.2 percent in February to 66.0 percent in March. It had been 66.5 percent a year ago.

Unemployment Rate for College Grads Falls

The unemployment rate for college grads fell back from 3.0 percent to 2.8 percent. The unemployment rate for college grads, while well below the overall unemployment rate, has been unusually high by historical standards. It averaged just 2.1 percent in the strong labor market in the years just before the pandemic, so clearly the labor market is less favorable to this group today.

Share of Unemployment Due to Quits Edges Higher, Duration Measures are Mixed

The share of unemployment due to people quitting their jobs increased from 11.4 percent to 12.4 percent. This is still low given the current unemployment rate. This is consistent with the low quit rates reported in the JOLTS data. Workers do not feel comfortable leaving jobs, although the March story is better than in February.

The average duration of unemployment spells fell slightly from 25.7 weeks to 25.3 weeks, but that is still up considerably from 22.9 weeks a year ago. The median duration increased from 11.1 weeks to 11.5 weeks, compared to 9.7 weeks a year ago. The share of long-term unemployed (more than 26 weeks) edged higher to 25.4 percent, compared to 21.3 percent a year ago.

Self-Employment Falls Sharply

The data on self-employment are highly erratic, but the number of people reported as either incorporated self-employed or unincorporated self-employed fell sharply in March. Unincorporated self-employed fell by 139,000 to 9,458k. This is 7.6 percent below the peak of 10,237k hit in March of 2024. Incorporated self-employed fell by almost 300,000 from 7,030k to 6,732k. The data for incorporated self-employed are not seasonally adjusted, so the month-to-month drop must be taken with caution. The March 2026 figure is down 128,000 from the year-ago level.

Mostly Positive Report, with Some Concerns and a War

The strong jobs growth in the March report is a surprisingly good economic signal. The growth was still highly concentrated in health care and social assistance, along with restaurants, but construction, manufacturing, and retail also showed job gains. Nonetheless, the drop in average hours and slower wage growth are grounds for concern. Inflation is certain to jump in March, and with wage growth having slowed from 4.0 percent in 2023-2024 to just 3.5 percent it is not clear wages will still be keeping pace.

On the household side, the drop in the unemployment rate is clearly good news, but the decline in the employment rate goes the wrong way. These data are erratic, so a small monthly decline could mean nothing, but it is not an unambiguously strong report.

And, as noted earlier, the reference period is the middle of the month, before the impact of the war was likely to be felt in a big way. April could look considerably worse.