US job growth rebounded in March and the unemployment rate unexpectedly fell, suggesting the labor market was stabilizing as the Iran war began.
Nonfarm 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 data out Friday. That was higher than all estimates in a Bloomberg survey.
The unemployment rate fell to 4.3%, though that partly reflected Americans leaving the workforce.
Economists had widely expected a bounce back in employment in March after a strike by more than 30,000 health care 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 the Middle East.
US Treasury yields rose following the release. The stock market is closed for the Good Friday holiday.
The advance in payrolls was led by health-care employment, which recovered after the resolution of the strike by Kaiser Permanente workers in California and Hawaii. Construction and leisure and hospitality also rose following declines in February, possibly reflecting a weather-related snap back. Manufacturing payrolls rose by the most since the end of 2023.
The participation rate — the share of the population that is working or looking for work — slipped to 61.9% in March, the lowest since 2021. The rate for workers of ages 25-54, 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% from February, and 3.5% from a year earlier — the least in almost five years.
Other data suggest the labor market wasn’t gaining momentum before the war in Iran. Job openings fell in February and hiring slowed to the weakest since 2020. An index of hiring plans among small businesses held steady in March at one of the lowest levels in recent years.
The employment survey reflects the second week of March, just after the US and Israel launched the Middle East conflict on Feb. 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.
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