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.