March jobs report may show labor market stable before Iran war

The March jobs report is expected to show the U.S. labor market remained relatively stable last month, but experts say the Iran war has already shifted the economic landscape in the weeks since the data that inform Friday’s report was collected.

Subscribe to read this story ad-free

Get unlimited access to ad-free articles and exclusive content.

Surveys conducted by the Bureau of Labor Statistics were completed by March 12. At the time, the full brunt of the war — for which President Donald Trump has laid out an uncertain timeline — had yet to hit the job market.

Three weeks later, gasoline prices have surged to more than $4 a gallon, a level that, if it is sustained, would sap U.S. consumers of hundreds of dollars in annual discretionary income.

On Wednesday, the Atlanta Federal Reserve lowered its real-time gross domestic product estimate to 1.9%, down from more than 3% just before the start of the war.

Still, Friday’s report will have captured some of the rising uncertainty that has helped sink stock markets and spike oil prices over the past few weeks.

“Even before the energy shock, consumers were facing headwinds from a soft labor market, weak real income growth, and an already depressed personal saving rate, with the Michigan consumer survey’s major purchases index pointing to a continued slowdown in spending on goods,” economists with Pantheon Macroeconomics wrote in a note to clients this week. “The surge in gas prices and hit to confidence since the war began will compound those headwinds.”

Broadly, the jobs market remains at a standstill — what many experts are calling a “no-hire, no fire” environment, in which both layoffs and new placements are subdued.

On Tuesday, the Bureau of Labor Statistics reported the hiring rate in February fell to just 3.1% of the U.S. workforce, a level last recorded in April 2020, as the Covid-19 pandemic bore down. And it’s only slightly above the 2.8% hiring rate recorded during the depths of the 2008-09 Great Recession.

Job openings also fell in February, though they appear to be stabilizing overall. The rate of layoffs also remains at an all-time low.

Meanwhile, many Americans’ views of the economy and Trump’s handling of it continue to sink to new depths.

On Wednesday, a CNN poll found that just 31% of respondents approve of how Trump is managing U.S. economic performance, with just 27% saying they approve of his handling of inflation, down from 44% a year ago. His overall approval rating appears to have stabilized at about 35%.

A debate is now underway about how many jobs the U.S. would need to add each month to keep the unemployment rate — currently 4.4%, or roughly 7.6 million people — stable.

Over the past year, a massive reduction in overall immigration to the U.S., coupled with a growing number of baby boomers leaving the workforce, means fewer overall jobs need to be created for the economy to absorb newcomers to the labor force and keep the overall unemployment rate stable, according to economists with the Dallas Federal Reserve.

That overall number of new jobs needed is known as the “breakeven” employment rate. Whereas in the past it might have required hundreds of thousands of new positions per year to keep the unemployment rate steady and accommodate new entrants, the economists wrote in a note published this week that the breakeven employment rate now may be close to zero.

The unemployment rate is calculated by taking the number of workers who are actively looking for jobs and dividing it by the total workforce, both employed and unemployed.

If the overall workforce continues to shrink, fewer new jobs will be needed to incorporate workers entering the labor force, such as recent college graduates or parents who put their careers on hold for a few years.

As long as that dynamic remains in force, the number of net new jobs that need to be added to keep the U.S. economy growing each month will remain lower than it would be if lots of immigrants were arriving in the country or fewer workers were retiring.

That won’t necessarily make looking for a job any easier. The median spell of unemployment is now about 2½ months, with the average much longer — about six months. About 25% of all unemployed workers are out of work for at least 27 weeks.

But the current stasis can’t last, said Laura Ullrich, director of economic research at Indeed. At some point, firms will decide they can either see past the uncertainty to a pickup in demand and start making plans to hire — or decide that additional layoffs are necessary.

“One of the two will win out,” she said.