A strong boost in payrolls doesn't necessarily mean a strong March jobs report

Wait, now we're finding out that the US job market doesn't suck any more?

The U.S. economy added 178,000 jobs in March, and the unemployment rate ticked down to 4.3%, a showing that beat economists’ expectations and offered a bit of optimism after a shockingly bad year for jobs.

WOW! Maybe things really did turn around, higher gas prices be damned!

But more likely, this is a one-month blip, since the strong March job numbers up top mask a lot of weakness below. And the overall trend is still not the economy's friend.

“The unemployment rate dropped, but for the wrong reasons: a loss in labor force participation,” [KPMG chief economist Diane] Swonk told Fortune. The declines were concentrated among prime working-age men (twenties to thirties); young women between ages 20 and 24; and men over 55. In other words, the unemployment rate fell not because people found work, but because they became discouraged and stopped looking.

The broader U-6 measure of unemployment, which captures exactly those discouraged workers plus those stuck in part-time jobs when they want full-time work, actually edged up to 8%, even as the headline rate improved. Swonk said government workers forced to take part-time jobs during the government shutdown last month likely contributed to that increase.

That uptick aligns with the latest JOLTS report from earlier this week, which showed hiring has fallen to its lowest rate since April 2020, a level previously seen only during the Great Recession.

The jobs report marks a sharp rebound from February, which was revised to show a loss of 133,000 jobs, a number that shocked economists for how much it missed expectations. But as the saying goes, one data report is just a signal; two is a pattern; three months, really, is what tells you the trend. The three-month moving average, Swonk said, sits at just 68,000 jobs, and over the past year the economy has added only 156,000 positions total, the weakest stretch since the pandemic.

So let's look at that 3-month average of US job growth, and see what the trends are telling us.

So lower growth than we had at the start and the end of 2024, but Trump/GOPs could point out that job growth is slightly better than it was 6 months ago. Although that growth trend is very choppy given that we have not had two straight months of overall job growth since last May.

The March jobs survey was done in the second week of March, which meant that consumers and businesses have yet to make the significant adjustments that are likely to result from gas prices costing them billions of dollars more a month. When that happens, I have a hard time believing those higher costs and prices will lead to MORE hiring.

And that financial strain of higher prices is compounded by the fact that wage growth keeps going down, as mentioned by this part of the March jobs report.

In March, average hourly earnings for all employees on private nonfarm payrolls rose by 9 cents, or 0.2 percent, to $37.38. Over the year, average hourly earnings have increased by 3.5 percent. In March, average hourly earnings of private-sector production and nonsupervisory employees edged up by 5 cents, or 0.2 percent, to $32.07.

The average workweek for all employees on private nonfarm payrolls edged down by 0.1 hour to 34.2 hours in March. In manufacturing, the average workweek was unchanged at 40.2 hours, and overtime was also unchanged at 3.0 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls remained at 33.8 hours.

That's not good when we are likely to see inflation jump by a lot more than 0.2% in March. And while some people may have elected Trump to get back to the pre-COVID economy, I don't think they meant to cut wage growth back down to the levels of 2018 and 2019.

And as we saw after 2021, higher wage and job growth isn't enough to soothe the typical American if prices are going up. I can't imagine they'll be happier with lower job growth and wage growth being weaker while inflation rises in 2026.

So even if there was a strong increase of jobs in March, let's not confuse that with an economic boom,. One good month of payrolls does not make for a trend, and the unimpressive household survey numbers and declining wage growth showed things weren't great as they were. And it'll look a lot worse as inflation increases past the 3% rate it was at before the bomvbs started falling in the Middle East.

Growing Medicaid deficit and higher SNAP costs for state is lowering chances of tax cuts in Wisconsin

Wisconsin’s projected budget deficit for Medicaid grew again in the first 3 months of 2026. And the Department of Health Services says our state is not alone in struggles to pay the costs of providing medical services.

Medicaid provides essential health care services to one in five Wisconsinites and is a key cornerstone to the state’s health care system. Across the country, payors and providers are experiencing a shifting healthcare landscape with costs increasing overall. While states’ Medicaid programs vary significantly, programs are facing growing budgetary challenges with approximately two-thirds of states predicting a high likelihood of budget shortfalls in the near term. Ongoing uncertainty around federal policy implementation and unpredictable economic conditions in the medium-term are further compounding these budget challenges.

Since December, the Department received an additional three months of data regarding enrollment and service utilization. The Department now projects Medicaid expenditures will exceed the available budget by $263.5 million GPR by the end of the biennium, which is 2.7% above budgeted GPR levels under 2025 Act 15, the 2025-27 biennial budget.

Then DHS goes on to break down the areas where expenses are running higher than expected.

The Wisconsin DHS goes on to say that this is generally due to larger-than-expected enrollment and higher-than-expected costs of services in these areas.

This deficit appears is separate from the $72.7 million that was added to the DHS budget to pay for additional positions and state costs associated with SNAP benefits. Gov Evers signed that state bill into law this week, and the moves are an effect of the Big Bunch of Bollocks Bill from Trump/GOP last July that passed additional expenses and responsibilities down to the state.

Historically, the federal government covered half of the administrative costs for SNAP, known as FoodShare in Wisconsin. But the federal GOP bill dropped the feds’ share to 25% starting in federal fiscal year 2026-27.

The federal legislation also requires states to keep their error rate below 6%. Those that eclipse that mark for ineligible enrollees must cover at least 5% of the total cost for SNAP benefits beginning in federal fiscal year 2027-28. If Wisconsin hit 6%, its share of the costs for benefits would amount to $68.2 million. If it climbed to 10%, that penalty would jump to $204.6 million.

The state’s error rate was 4.5% for federal fiscal year 2023-24. The error rate for 2024-25 won’t be out until this summer.

The law Evers signed includes 28 federally funded project positions at DHS for FoodShare quality control over the next four years. It also cuts authorization for 14 other federally funded project positions elsewhere in the agency.

Put that together with the $263.5 million Medicaid deficit, and that’s an added state cost of more than $336 million if trends continues. That’ll take care of more than 13% of the $2.5 billion in the state’s bank that’s projected to be around at the end of June of next year, and the extra costs for products and services in other areas that are likely to come from higher-than-expected inflation also seem likely to cut into the budget surplus.

In addition, Wisconsin doesn’t have its sales tax put onto gasoline sales, so there isn’t going to be any extra revenue coming in as a result of that. And if people drive less, it’ll reduce available funding for an already-tight Transportation Fund.

I’m not even adding in the potential budget damage that may come if we fall into recession that results in job loss and lower economic activity in general. So I guess I’m trying to say that we may not have as much money for a special session for tax cuts than we thought a couple of months ago. Which makes me wonder if us in Wisconsin are are able to get any tax relief at all before the November elections, and that’s not a lack of outcome I would have thought we’d have before the bombs started falling in Iran.

I'd certainly hope Gov Evers holds off on any special sessions for tax cuts for at least another month, as 2025's income tax cuts at the state level that are increasing refunds, but also are reducing the amount of revenues that are going into the state's coffers. If revenues start running below the Legislative Fiscal Bureau's estimates from January, we would have even less cushion to give in tax cuts. And with Dems becoming more likely to be able to put in their plans for taxing and spending for the first time in 16 years, it would be useful for them to have fiscal breathing room to increase their chances of getting some real changes done.

Jobs market was low-hire, low-layoff before the bombs started falling

Even before war in the Middle East broke out and gas wasn't averaging $4 a gallon nationwide, the US jobs market was not in a good place. The Bureau of Labor Statistics told us at the start of March that US jobs declined by 92,000 in February, and it wrapped up the month by saying that the percentage of Americans getting new jobs was at its lowest non-COVID levels in 15 years.

US hires plunged to 4.8 million last month, down by 387,000 from a year ago, according to the Job Openings and Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics. Outside of the pandemic, the hiring rate hasn’t been this low since the beginning of 2011.

“3.1% is not only comparable to the COVID low point - it's also comparable to late 2009 and early 2010, when the unemployment rate was around 10%,” Guy Berger, director of economic research at the Burning Glass Institute, wrote on X. “Hiring was ice cold in February.

It’s also the first non-COVID month where there have been fewer than 5 million hires in America since 2014.

Another sign of a worsening market for workers is that quits in February were at their lowest non-COVID amount since 2016. Other than some “Trump is back in office” optimism that happened this time last year, we’ve seen a general decline in quits since the peak of the Great Resignation of 2021-22.

On the other side, while February was the first time in four months that we had over 1.6 million private sector layoffs, it’s still below what we had in most of 2025.

Which means the coming months will be important to see if the amount of layoffs go back up, and continue the slow rise that we saw between 2022 and 2025, or if we stay at a lower number for 2026.

I will say that ADP has been showing better jobs numbers than the US Department of Labor recently, as ADP's report on Wednesday said overall job growth was solid for March, although heavily concentrated in a handful of sectors.

Private sector employment growth was a bit better than expected in March, but health care and construction continued to provide nearly all the momentum, payrolls processing company ADP reported Wednesday.

Job growth totaled 62,000 for the month, down just 4,000 from February’s upwardly revised level but above the Dow Jones consensus for 39,000. ADP’s report does not include government employees.

Like February’s report, two sectors essentially provided all the gains.

Education and health services contributed 58,000 — identical to the February total — while construction added 30,000. The health services total was held back in the prior month due to a since-resolved strike at Kaiser Permanente that sidelined more than 30,000 workers in Hawaii and California.

I'd be cautious about the construction number, as it could have simply been a head start due to warmer-than-average weather in the month. But you look at the overall trend in the ADP report over the last few months, and it's not that bad, with growth averaging around 54,000 jobs a month since June.

That may give a bit of hope for a March jobs report that likely won't be heavily impacted by gas prices spiking up in that month. Many sectors are still flatlining, and actual hiring continues to be slow, but because layoffs are still historically low, we aren't in a recessionary situation. Of course, if consumers stop spending in other areas because gas prices start taking a whole lot of money out of their wallets, it won't take much for the positive ADP numbers to go back to negative very quickly.