Jobs Report Seen Showing Slower Hiring as Tariffs and Federal Job Cuts Loom

Key Takeaways

• Job growth is forecast to remain modestly healthy in March but slower than in recent months.
• A small impact from federal workforce cuts and tariffs is expected in March, with greater effects possible in the coming months.
• A March report that shows low jobs growth and high wage growth could be the worst-case scenario.

Forecasts for the March nonfarm payrolls report indicate that the US labor market continued to grow at a solid but slower pace last month. But with uncertainty around tariffs, inflation, and a potential economic slowdown, the outlook remains far from clear.

According to FactSet, economists predict the US economy added 125,000 jobs in March, lower than the 151,000 jobs added in February. Meanwhile, the unemployment rate is forecast to rise to 4.2% from 4.1% last month.

Economists point to uncertainty about the impact federal job cuts will have on the March payrolls report. Despite headlines of massive cuts, court orders left many federal employees on government payrolls. In addition, warmer weather across key parts of the country in March after a cold start to the year could inflate job gains.

Russell Price, chief economist for Ameriprise Financial, characterizes the overall labor market as “okay.” He forecasts job growth will come in at 130,000, slightly above the consensus estimate. “It’s not nearly as strong as it has been and it has likely stalled because of the uncertainty related to tariffs and what that’s going to mean for the overall pace of economic growth and inflation,” he notes.

March Jobs Report Forecast Highlights

• Job report release date and time: Friday, April 4, at 8:30 a.m. EDT
• Nonfarm payroll employment is forecast to rise 125,000 versus the 151,000 increase in February, according to FactSet.
• The unemployment rate is forecast to rise to 4.2% from 4.1% in February.
• Hourly earnings are projected to rise 0.3% monthly from 0.3% in February.

Price expects a large portion of the growth to come from transportation and warehousing, utilities, information systems, and construction, with many of those sectors benefiting from the bad weather in January and February.

Weather Impact Could Lift March Job Report Gains

Goldman Sachs economists predict 150,000 jobs were added in March, above the consensus estimate and in line with February’s number. “Big data indicators were solid, the return of striking workers will be a 15K boost, and hiring should rebound in weather-sensitive industries after an especially cold winter,” they wrote in a note on Monday.

Meanwhile, Bank of America economists expect job growth to pick up, forecasting 185,000 new jobs in March.

UBS economists similarly expect a strong gain, with 180,000 new jobs for the month. “The March employment report is expected to be supported by unseasonably warm weather,” they wrote.

On the negative side, Price expects downward pressure to come from the education sector, due to recent DEI-related cuts. “If it doesn’t put pressure on the numbers this month, it may be a situation where those individuals are getting severance and so they won’t really show in the data until later months when that severance runs out,” he explains. Price also anticipates downward pressure from the healthcare sector due to potential Medicaid spending cuts, and from travel and leisure, citing recent weakness in airline demand.

Muted Impact Expected from DOGE Cuts and Tariffs

“Government job growth is expected to come in at just 10K due to the federal hiring freeze/DOGE,” Bank of America economists wrote in a note last week. “Given the muted claims data in the survey week, we do not expect DOGE-driven job cuts to be a sizable drag, although risks are to the downside.”

Price also anticipates a modest impact from federal workforce cuts, pointing to the same severance pay dynamics seen in the education sector. He adds that many of these cuts affected recent hires or individuals whose future start dates were revoked. “I think that a lot of those are going to put pressure on the jobs report for the next several months, rather than just one significant downward pressure in a single month,” he says.

Price says that in the short term, tariffs could provide a modest boost to jobs: “When I look at transportation and warehousing, I think there might be a positive impact there because of the added imports that were likely coming into the country to try and get in under the wire, relative to potential tariffs.”

Economists Look for Wage Growth to Hold Steady

Wage growth is forecast to come in at 0.3%, the same number as in February. Economists at Goldman Sachs and Bank of America also forecast 0.3% growth, while Price predicts a higher growth rate of 0.4%.

Price notes that wage growth will be closely watched, as weak job growth paired with high wage growth could fuel stagflation concerns. “Anything stronger than [0.4%], particularly if we have a nonfarm payroll number that’s 120,000 or less, would further concerns about the job market and inflation,” he explains.

Will the Fed Cut Interest Rates in 2025?

With sticky inflation and uncertainty around trade policy in Washington, the timing of interest rate cuts is unclear. At its March meeting, the Federal Reserve held rates steady and maintained its forecast of making two cuts in 2025. But Morningstar senior US economist Preston Caldwell cautions that these projections should be taken with “a grain of salt,” as major tariffs could prompt the Fed to change course.

Price also forecasts two cuts in the second half of 2025, but he acknowledges that it heavily depends on the impending tariffs.

In its press release following the March meeting, the Fed stated that the unemployment rate has stabilized in recent months and that labor market conditions remain strong. Analysts think that sustained strength in the labor market will give the central bank more flexibility to evaluate the effects of new trade policies.

Bond futures markets are currently pricing in 85% odds that the Fed keeps rates unchanged in May, according to the CME FedWatch Tool.