U.S. Employment (March 2025)

Payrolls jump in March, while the unemployment rate ticks up to 4.2%

• The U.S. economy added 228k jobs in March, well above the consensus forecast of 140k. Payroll figures for the prior two months were revised lower by a total of 48k jobs. 
  • For the first quarter, payrolls gained 456k, down from Q4-2024's 656k pace. 
• Private payrolls rose 209k – well above February's 117k – with the largest gains seen in health care & social assistance (+78k), leisure & hospitality (+43k), transportation & warehousing (+22.9k), retail trade (+23.7k). Government hiring added 19k new positions last month, but all were concentrated at the state & local level. Federal hiring was lower by 4k.
• In the household survey, civilian employment (+201k) rose by slightly less than the labor force (+232k), pushing the unemployment rate up to its post-pandemic high of 4.2% (from 4.1% in February). Meanwhile, the broader U-6 measure of unemployment, which includes those working part-time for economic reasons and who are marginally attached to the labor force, fell to 7.9%, after reaching a three-year high of 8.0% in February. 
• Average hourly earnings (AHE) rose 0.3% month-on-month (m/m) – up from a downwardly revised 0.2% m/m gain in February. The twelve-month change slipped to 3.8% (from 4.0% the month prior). 
• Aggregate weekly hours rose 0.2% m/m, following a gain of 0.3% m/m in February.

Key Implications

• Non-farm payrolls surprised all expectations, coming in well above the consensus forecast and surpassing each of the two prior months job gains by a little over 100k. Some of this is likely payback from January/February, where bad weather and the wildfires in California may have weighed on hiring activity. But given the ongoing efforts to shrink the federal government and rising trade uncertainty, we suspect that job growth is likely to soften over the coming months. 
• This week's reciprocal tariff announcement marks a significant escalation in trade tensions, and has sparked fears that the U.S. economy is headed for a recession. Longer-term Treasury yields have fallen by over 35 basis points in recent days, with the 10-year currently sitting at 3.93%. Since releasing our Quarterly Forecast on March 18th, we've already marked down our 2025 GDP forecast by 0.6 percentage points to 1.3%. But this assumes the current tariffs are only in effect for six-months, after which most countries/regions see some reprieve. Should the tariffs remain elevated for longer, the odds of the U.S. economy slipping into a recession start to increase. Fed Chair Powell is on deck to speak later this morning, let's see if he can help to calm unnerved financial markets.

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