Slow, Steady US Job Growth Expected In March

U.S. job creation probably decelerated in March due to widespread layoffs of public sector employees aimed at reducing federal spending and businesses' hesitation to boost hiring because of tariffs on imports that jeopardise the economy's stability. The outlook for the labour market is expected to keep deteriorating following President Donald Trump's announcement on Wednesday of a 10 per cent minimum tariff on the majority of goods brought into the U.S., provoking threats of retaliation and unsettling global financial markets. Economists projected that Trump's extensive import tariffs had raised the country's effective tariff rate to the highest point in over a century and cautioned about job losses as companies and consumers reduced their spending. Trump's wave of tariffs since his return to the White House had already unsettled companies that celebrated his electoral win in November.

Economists indicated that companies probably completed their 2025 expenditure plans by the end of the previous year but are now hurriedly re-evaluating, which may lead many to adopt a more cautious stance on increasing their workforce. "We have transitioned from an economy that was performing exceptionally to one that is truly chaotic," stated Brian Bethune, an economics professor at Boston College. "It's an unfavourable setting for companies; it's a disaster." The Labor Department's highly anticipated employment report on Friday is projected to reveal a rise of 135,000 jobs in nonfarm payrolls last month, following a gain of 151,000 in February, according to a Reuters poll of economists. That figure would be significantly lower than the 190,000 monthly average from the last six months but just adequate to match the increase in the working-age population.

Tariffs, layoffs slow job growth

The unemployment rate is expected to remain unchanged at 4.1 per cent. Payroll growth predictions varied between 50,000 and 185,000, indicating potential upside and downside risks to the projection. Federal government payrolls probably dropped by up to 25,000 positions last month. Tech tycoon Elon Musk's Department of Government Efficiency, known as DOGE, has drastically reduced the public workforce in a bold initiative by the Trump administration aimed at slashing expenses and slimming down the government. However, courts have mandated the reemployment of thousands of employees, while some have been placed on administrative leave and others have chosen deferred resignations, complicating the tracking of job reductions. Payroll growth may surpass predictions in March, as the slowdown in January was partly due to extremely cold weather. Cold weather continued in February, restricting the expected recovery. A minimum of 14,800 striking nurses and supermarket staff resumed work in late February and will be part of March's payroll figures.

Economists indicated that the impacts of the mutual tariffs might be noticeable as early as April's employment report. Retail payrolls are expected to decrease as consumers tighten their belts due to rising prices, while the effects on manufacturing may intensify gradually. "Although we do not anticipate widespread layoffs, we predict that the unemployment rate will exceed 4.5 per cent in 2025 in the forthcoming quarters due to worsening labour market conditions and a further slowdown in hiring," stated Lydia Boussour, senior economist at EY-Parthenon. Business operations picked up at the beginning of the year as firms hurried to finalise work orders and import goods before the tariffs took effect, significantly increasing the trade deficit. At the close of 2024, consumers participated in pre-emptive purchases of items but reduced their buying in January. Estimates for gross domestic product growth in the first quarter are under a 0.5 per cent annualised rate, indicating a strong likelihood of a contraction. Economists are not dismissing the possibility of a recession occurring within the next 12 months.

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Estimates for GDP growth in the first quarter are below a 0.5 per cent annualised rate, indicating a strong likelihood of a contraction. Economists are not dismissing the possibility of a recession occurring within the next 12 months. They anticipate that both inflation and the unemployment rate will increase. Confronted with a declining economy and increasing unemployment, economists indicate that the Federal Reserve would have to lower interest rates despite persistent inflation. Officials at the U.S. central bank, in projections unveiled during their March policy meeting, anticipate two interest rate reductions this year. Financial markets anticipate that the Fed will continue to ease policies following a pause in January. The policy rate of the central bank is presently between 4.25 per cent and 4.50 per cent. "We might not be taken aback if, perhaps next year, the overall outcome of this tariff strategy leads to deeper cuts than anticipated, but I believe it will be a complicated journey for the Fed to achieve that," stated Ernie Tedeschi, director of economics at the Budget Lab at Yale. "Meanwhile, the Fed will exercise great caution regarding any adjustments to rates." It is quite worried about inflation picking up again and understands that tariffs will increase pressure on prices, so it aims to proceed with caution.