U.S. job growth rebounded sharply in March, easing fears that the war with Iran and a surge in oil prices would quickly spill over into a weaker labour market and economic slowdown, and reinforcing expectations that the Federal Reserve will keep interest rates on hold for the rest of the year.
Non-farm payrolls increased by 178,000 in March from the previous month, the Labor Department said on Friday, the largest gain since December 2024, when 237,000 jobs were added. The figure was nearly three times the Dow Jones consensus forecast of 59,000.
Economists had expected some payback after February’s disappointing numbers, which were distorted by strikes in the healthcare sector and severe winter weather, but the scale of the rebound surprised markets.
Revisions to prior data were modestly negative. Job gains for January and February were revised down by a combined 7,000, with January’s change marked up by 34,000 and February’s revised down by 41,000.
The unemployment rate edged down to 4.3% in March from 4.4% in February, coming in below economists’ expectations of 4.4% and tempering talk of an abrupt cooling in labour demand. Still, the labour-force participation rate slipped to 61.9% from 62.0%, suggesting that part of the decline in joblessness reflected fewer people actively seeking work rather than purely stronger hiring.
Healthcare led March’s job gains, adding 76,000 positions as workers returned following the end of strikes that had weighed on February’s figures. Construction payrolls rose by 26,000, transportation and warehousing by 21,000, and social assistance by 14,000, underscoring broad-based though moderate hiring across key service and goods-producing industries.
Wage pressures appeared contained. Average hourly earnings rose 0.2% on the month, below the 0.3% increase expected by markets. Compared with a year earlier, wages were up 3.5%, also undershooting forecasts of 3.7%. The softer pay data may help calm fears of a renewed wage–price spiral even as headline inflation faces upward pressure from energy costs.
The March report follows a notably weak February, when job losses in several sectors had stirred concern on Wall Street that the labour market was losing momentum more rapidly than anticipated. The latest figures, however, point to an economy that remains resilient in the face of geopolitical shocks.
With employment showing unexpected strength, analysts said investor focus is likely to pivot back toward inflation dynamics and the Fed’s reaction function, particularly as the U.S.-Iran conflict, now in its second month, keeps oil prices elevated and threatens to push consumer prices higher.
Rate-cut bets, once widespread at the start of the year, have largely evaporated. The bond market has abandoned expectations that the Fed will deliver roughly two quarter-point cuts in 2026 and is now increasingly pricing in no easing at all.
Immediately after the release of the employment data, interest rate futures tracked by CME Group’s FedWatch tool showed markets assigning an 81% probability that the Fed will leave its benchmark rate in the current 3.50%–3.75% range through December, up from 76% the previous day.
Fed Chair Jerome Powell signalled a similar stance in remarks at a public event on March 30, saying current policy is “in a good position to wait and see how things unfold,” a formulation widely interpreted as an endorsement of a prolonged pause while policymakers assess the balance between persistent inflation risks and still-solid job growth.
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