Against this backdrop, a recent assessment by Jerome Powell, Chair of the US Federal Reserve, has gone viral. “Effectively, there’s zero net job creation in the private sector. But actually, that looks like that’s about what the economy needs in terms of dealing with very, very low…non-existent, really…growth in the labour force. Which of course we’ve never had in our history. So you’ve got a sort of zero employment growth equilibrium. Now that’s balance,” he said during a press briefing last month. Data released on Friday appeared to support his assessment.
The unemployment rate fell to 4.3% in March, but only because 396,000 people dropped out of the labour force, while the average workweek shortened from 34.3 hours to 34.2 hours. The Iran war has also triggered a sharp spike in oil prices and sent global markets careening, wiping about $3.2 trillion from the stock market in March. Economists told Reuters that mass deportations by the Trump administration have also contributed to labor market paralysis by reducing supply, which ultimately hurts demand for goods and services, and workers.
According to the Bureau of Labor Statistics, nonfarm payrolls increased by 178,000 in March after a downwardly revised 133,000 drop in February. March’s employment report likely has no impact on the interest rate outlook, with the effects of supply chain disruptions from the conflict still to work their way through the economy. The odds of a rate cut this year have greatly diminished. The Federal Reserve left its benchmark overnight interest rate in the 3.50% to 3.75% range last month.
Sector-wise, the healthcare sector accounted for most of the job gains, adding 76,000 positions, partly reflecting the return to work of 35,000 employees at physicians’ offices following a strike, while employment also increased at hospitals. Warmer weather also boosted construction employment by 26,000 positions, while transportation and warehousing payrolls increased by 21,000 jobs, even as employment in the sector remains down by 139,000 since reaching a peak in February 2025.
Further gains were recorded in social assistance employment. However, federal government employment declined by another 18,000. Since reaching a peak in October 2024, federal government employment is down by 355,000, or 11.8%. There were also job losses in the financial activities sector.
The data underscores a fragile equilibrium in the US labor market, where headline job growth masks weakening fundamentals, raising the risk of an imminent downturn amid global conflict, labor force contraction, and tightening economic conditions.
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