Workers outside a cafe in Washington, D.C., on March 11, 2026.
U.S. job growth rebounded in March and the unemployment rate unexpectedly fell, suggesting the labor market was stabilizing as the Iran war began.
Non-farm payrolls rose 178,000 last month, the most since the end of 2024, after revisions showed a sharper decline in February, according to Bureau of Labor Statistics (BLS) data out on Friday. That was higher than all estimates in a Bloomberg survey.
Economists had widely expected a bounceback in employment in March after a strike by more than 30,000 healthcare workers and severe winter weather contributed to an outsize decline in February. The solid increase will likely reinforce the Federal Reserve's focus on inflation risks amid a rapid run-up in energy prices sparked by the war in Iran.
"If the conflict had not happened in the Middle East, I think the stabilization narrative would be gaining momentum," said Michael Pugliese, a senior economist at Wells Fargo & Co. "The problem, though, is we now have this new shock working its way through the economy."
The advance in payrolls was led by healthcare employment, which recovered after the resolution of the strike by Kaiser Permanente workers in California and Hawaii. But the report showed gains were widespread across industries, with a measure of the breadth of hiring rising to the highest level in more than two years. Construction, and leisure and hospitality, payrolls also rose following declines in February, possibly reflecting a weather-related snapback. Hiring in manufacturing was strongest since the end of 2023.
.What Bloomberg economists say..."We expect payrolls to pick up steam through June, reflecting increased leisure and hospitality hiring as the U.S. hosts the soccer World Cup, and a cyclical rebound in the freight sector. The massive supply shock since the start of the Iran war likely won't show up in payrolls until the second half of the year. We expect the unemployment rate to rise more briskly then."— Bloomberg economists led by Anna Wong |
The outsize increase in payrolls in March followed a revised 133,000 drop in the prior month, which marked one of the biggest declines since the pandemic. But, on average, payrolls rose 68,000 in the first three months of 2026, the strongest run in almost a year.
At the same time, the unemployment rate fell to 4.3 percent, though that partly reflected Americans leaving the workforce. The labor force participation rate—the share of the population that is working or looking for work—slipped to 61.9 percent in March, the lowest since 2021. The rate for workers ages 25 to 54, also known as prime-age workers, also fell. The number of people working part-time for economic reasons rose.
Economists are also paying close attention to how labor supply and demand dynamics are impacting wage gains, especially with inflation risks heating up again. The report showed average hourly earnings rose 0.2 percent from February and 3.5 percent from a year earlier—the least in almost five years. That may pose challenges for consumers facing a surge in energy costs as a result of the war.
The employment survey reflects the second week of March, just after the U.S. and Israel launched the Middle East conflict on February 28. Economists expect the war to have more of an impact on future jobs reports if the hostilities continue, as companies respond to higher energy prices and potentially diminished demand by delaying hiring or laying off staff.
"I don't think, as you saw with today's jobs report, that we should expect that people are going to have to revise their annual forecast very much," White House National Economic Council Director Kevin Hassett said on Bloomberg Television. "There will be some negative repercussions that will be very short-lived in the Asian economies, and we expect that disruption to be over really, really soon."
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