The US economy added 228,000 jobs last month, but the unemployment rate ticked up

(CNN) — As of March, the US labor market remained on solid footing: Job gains were broad-based and better than expected and participation picked up.

However, a lot has changed for the US economy — and the world — in the first few days of April. President Donald Trump levied sweeping and steep tariffs against American trading partners, a move that sent markets plunging and triggered a trade war.

“Liberation Day” and its aftermath were not reflected in the March jobs data released Friday. However, the employment snapshot provided a critical look as to how the labor market is holding up as Trump slashes federal spending (and jobs) and how it could weather increasingly turbulent times.

The US economy added a stronger-than-expected 228,000 jobs in March, a significant increase from February’s downwardly revised gains of 117,000, according to Bureau of Labor Statistics data released Friday. The robust gains notched in March were likely a rebound after wildfires and bad weather depressed job growth in January and February (which were revised down by a combined 48,000 jobs).

The unemployment rate in March ticked higher to 4.2% from 4.1%, driven higher in part by new entrants to the labor market.

Economists were expecting job growth to slow to 130,000 in March and for the unemployment rate to tick up to 4.2%, according to FactSet.

The March employment data is the “calm before the potential tariff-related storms,” Dana Peterson, chief economist at The Conference Board, told CNN in an interview. The tariff actions could trigger stagflation, where economic growth stagnates and inflation and unemployment rise, she said.

In that scenario, “prices are rising faster than [people] want; growth is weak; and there will be some layoffs that will follow the demand destruction that could happen from tariffs being implemented,” she said. “We don’t anticipate a recession, but you could certainly see weaker growth, higher inflation and a hit — either major or minor — to the labor market if these tariffs and also retaliatory tariffs on the US go forward.”

US stocks were battered by a sell-off Friday after China retaliated against the United States for Trump’s tariffs in a tit-for-tat that escalates a global trade war. US stocks futures were off their morning lows ahead of the jobs report but ticked lower as investors digested the data.

The Dow was lower by 1,450 points, or 3.6%. The broader S&P 500 was 4.1% lower. The tech-heavy Nasdaq Composite was 4.1% lower.

‘Great job numbers’ but ‘old news’

March’s report marked another solid month of job gains and a continuation of a historic streak for the labor market. The US has now added jobs for 51 months in a row, marking the second-longest expansion on record, BLS data shows.

Whether that continues, however, remains to be seen.

Recent economic data has indicated that uncertainty and layoffs are on the rise amid some monumental policy shifts from the Trump administration, including large-scale federal layoffs, funding cutbacks, mass deportations, and tariffs. One of the biggest moves came just this week, when Trump imposed a colossal set of new tariffs on America’s trading partners.

“The March employment report indicates that the labor market was in good shape as of last month, but its old news considering the Trump administration’s tariff announcement and ensuing global market rout,” Kathy Bostjancic, Nationwide’s chief economist, wrote in a note to investors on Friday.

President Donald Trump on Friday touted the strong gains in a post on his Truth Social platform.

“Great job numbers, far better than expected,” he wrote. “It’s already working.”

For nearly five years, the labor market has been the solid foundation underpinning consumer spending, which accounts for more than two-thirds of all economic activity. During the past year, job gains have slowed (an expected normalization after the pandemic), and the labor market has not collapsed.

However, while layoffs remain historically low, hiring and quitting activity have cooled, and economists have cautioned that the the slowdown in “churn” makes the labor market more susceptible to negative shocks.

“Today’s jobs report is a welcome sign, given the negative indicators we saw leading into it,” said Ger Doyle, US country manager at employment agency Manpower Group. “While the US labor market is proving to be resilient, there are signs of cooling that are consistent with employers navigating uncertainty.”

The DOGE ‘slow drip’

Though the ripple effects from tariffs and immigration-related activities could take longer to show up in the data, the federal workforce reductions have already started appearing. The sector has posted job losses for two consecutive months, dropping 11,000 jobs in February and 4,000 jobs in March, BLS data shows.

The Department of Government Efficiency’s actions weren’t expected to have a big impact just yet: While nearly 300,000 job cuts have been announced, not all federal workers were laid off immediately, so the impact to the labor market and unemployment is going to be a slow drip.

That being said, there’s a multiplier effect when these jobs are lost, contractors are given the boot and, especially, funding is cut. Sectors such as health care as well as state and local government will be important to watch closely to get a sense as to how these drastic policy changes are shaking the private sector.

The federal government job losses were more than offset by employment gains in state and local government — the two sectors that were primarily responsible for public sector job gains, especially in recent years. In total, the sector added 19,000 jobs in March.

The bulk of last month’s overall job gains came in the services sector, with health care and social assistance continuing to drive strong payroll growth (adding 77,800 jobs). Employment in leisure and hospitality rebounded in March, adding 43,000 jobs after posting losses in January and February, when wildfires and cold weather affected activity.

Job growth was more muted in goods-producing sectors, especially among makers of durable goods. That industry lost 3,000 jobs last month, helping to drag down the overall manufacturing sector, which added 1,000 jobs in March.

When February’s jobs report was released, Trump touted the then 10,000-job gain in manufacturing (which was revised down to 9,000 jobs) as a sign that his on-and-off tariff proposals were working. (However, it’s important to note that monthly economic data can be quite volatile and that the jobs report can be a “slow burn” reflection of changes in the economy).

Fed remains in wait-and-see mode

Average wages grew at a healthy 0.3% rate for the month and slowed to 3.8% for the year; however, that “yields solid personal income gains for households,” Bostjancic noted.

The moderating but still solid wage gains coupled with expectations that next week’s Consumer Price Index will show a continued slowing of inflation could have been seen as a “Goldilocks” report, Michael Feroli, chief US economist at JPMorgan wrote in a note to clients on Friday.

“Instead, today’s news does seem a little dated, but at least it’s good news that hiring wasn’t already weakening before the turbulence caused by the shock from trade policy,” he wrote.

Friday’s jobs data is likely to keep the Federal Reserve on the sidelines, Feroli noted.

Trump called on Fed Chair Jerome Powell Friday to cut interest rates — a demand the president has made a number of times of his hand-picked central bank leader with whom he has had a falling out.

Powell said Friday the Fed is in no rush to make any move, despite Trump’s historic tariff increase.

“Our macroeconomists are all working hard to, you know, to kind of digest the news of this week and try to filter that into the forecast that they’ll make, and policymakers are doing very much the same thing,” Powell said at a conference in Arlington, Virginia. “I will say, though, it feels like we don’t need to be in a hurry.”

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