March Jobs Report: Back on Track, But With Caution

March Jobs Report: Back on Track, But With Caution 

The March Employment Report reversed course from the February dip and posted a large gain: an increase of 178,000 jobs in March blew past expectations to the highest gain since December 2024. Unemployment ticked back down to 4.3% as labor force participation fell to 61.9%. While the headline numbers are stronger than expected, a peak under the hood presents a shrinking labor force and continued challenges for those looking for work. 

Industry trends

• Health Care and Social Assistance once again led the pack with 89,900 jobs added. Strike activity subsided in March, adding back the ~32k jobs that were temporarily paused from the count. But even removing the blip, job growth was in line with the past 12-month trend of roughly 60,000 jobs added. 

• Leisure and Hospitality reports the largest monthly gain, of 44,000 jobs, seen in the last two and a half years, despite soaring gas prices. Consumer sentiment and spending remain strong, giving the service industries a boost amid a backdrop of uncertainty. 

• Construction added 26,000 jobs as demographic demand for housing and increased demand for data center builds continue to prop up growth in this industry. 

• The Federal Government continued to shed jobs, now down 355,000 since October 2024.

• Financial and Insurance dropped 16,000 in March, continuing a downward trend for the industry.

Labor force dynamics 

• Labor force participation fell again in March, to 61.9%, marking the first time it has fallen under 62% since November 2021. 

  • A reduction in net immigration continues to weigh on this measure, as the foreign-born population has a higher participation rate than the native-born population. Foreign-born participation jumped to 67.2% in March, while native-born participation dropped to 60.7%. 

  • The population not in the labor force increased by nearly half a million in March. 

• The unemployment rate dropped, but was masked by a reduction in new entrants and reentrants to the labor market - with fewer people looking for work for the first time, or for the first time in a long time. 

  • A lack of turnover, with the ‘low-hire, low-fire’ environment, is leaving few opportunities for people to break in. 

  • Long-term unemployment dropped, but likely as many choose to exit the market. 

• Marginally attached workers - those who are not officially unemployed because they are not actively seeking employment - increased in March. 

  • A lack of job opportunities is pushing many unemployed workers out entirely, as unemployment becomes a permanent position for many instead of a temporary state.

• Wage growth slowed to 3.5% annually, continuing a downward trend. 

With today’s numbers, the labor market is poised to see a return of job growth in 2026. While strong growth today will be at lower levels than in years past, the acceleration in jobs will continue to pick up the pace into the spring. 

However, this report uncovers the bigger challenges that lie ahead: a shrinking workforce. Changing immigration trends are leading to lower labor force participation, as the native-born population continues to see a falling participation rate. Fewer workers are waiting out long unemployment stints, leading to more discouraged and marginally attached workers. An increase in job opportunities could bring many of these would-be workers back to the market, but it might not be enough to counteract the impacts of both shrinking immigration and an aging workforce. 

A tight labor market could be on the horizon as this year progresses, meaning many employers might want to plan now for how to remain competitive as job growth increases.