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.

A few numbers beyond the gas price spikes

Been on vacay and with the weirdness and outright stupidity inside and outside of America, it's been a lot to sort through. But wanted to quickly mention a few developments of the last week.

As the nationwide price of gas nears $4 a gallon and Wisconsin has seen its gas prices rise by $1.13 a gallon in the last month, has gas usage or supply actually slowed down in the US? And the answer so far seems to be "No." Which is a bit different than when gas was spiking up 4 years ago aftrer war broke out in Ukraine, and Americans dropped their usage.

I'll also add that we got indications in the last week that inflation was going through the pipeline of businesses even before bombs were falling on Iran and other parts of the Middle East.

PPI: The Producer Price Index for final demand increased 0.7 percent in February, seasonally adjusted. ... Core +0.5 percent Way above consensus forecast.

— Bill McBride (@calculatedrisk.bsky.social) March 18, 2026 at 8:06 AM

Goldman: "Core import prices rose 1.2% month-over-month, above expectations. ... We estimate that the core PCE price index rose 0.32% in February, corresponding to a year-over-year rate of +2.93%."

— Bill McBride (@calculatedrisk.bsky.social) March 25, 2026 at 10:15 AM

So we were set up to have a sizable increase in consumer prices for March and/or April outside of what will be a 30%+ increase in gas prices. Then combine that reality with the increase in the federal budget deficit that the war and the tax cuts are causing, and the bond market has seen yields jump over the last month.

And one last item I'll note is that the income tax cuts in the last Wisconsin state budget are also starting to show up in the state's bank account, as there was an adjusted decline in income tax receipts of more than 30% for February due to higher refunds.

If we get another month of lower income tax receipts for March, does that and the prospect of a possible inflation-induced recession start to eat into the $2.5 billion surplus, and tank any chance of income or property tax relief before the November elections?

More news to come in the coming days, for sure. But the trend doesn't look great for either fiscal stuff, or the US economy as a whole.

"Gold standard" jobs report shows just how dead job market got in 2025

As I mentioned in the post on GDP and income/spending, the Quarterly Census of Employment and Wages (QCEW) had its latest update last week. This "gold standard" of jobs reports (so-called because it uses data from around 90% of private sector employers who account for around 95% of all US jobs) compared the totals from September 2025 with September 2024, and it showed that 25 of the 50 US states lost jobs in that time period.

And you can see Wisconsin is one of those 25 states that lost jobs in this time period, with a decline of more than 11,000 in this survey (a loss of 0.4%). That ranks us 40th in the nation, and 6th out of 7 in the Midwest (thanks Iowa!).

Not great, with big losses in sectors such as manufacturing (-7,577) and trade/transportation/utilities (-8,785). There also were nearly 1,100 jobs lost in Wisconsin in the sector with the highest wages - Information (generally IT Technology and related industries).

But the slumps in those sectors weren't only happening in our part of the country. 1 out 40 jobs in the Information sector nationwide were lost in this time period, and over 212,000 jobs went away in manufacturing. That continues the slide we've seen in the manufacturing sector for the last few years, and Trump's tariffs clearly have not turned that trend around.

There was one positive in that QCEW reort, as it showed solid growth in the average weekly wage (+4.7, or $66/week). That's a lot better than the 3.4% increase that happened between June 2024 and June 2025, and it led to significant upward revisions in employment-based income for the income and spending report.

But we also know prices kept rising to the tune of 3% or so in that time period, and that's with a sizable amount of places that had fewer jobs overall. And UW-Madison's Menzie Chinn says the bad QCEW numbers mean the already-lame jobs growth numbers for 2025 might end up being even worse when we see benchmark revisions this Summer.

New reports show a lame US economy at end of 2025 and early 2026 before this stupid war

Q4 GDP in America already had a surprisingly small 1.4% figure reported last month when some projections had about double that level growth. But a new report on Friday said it was even weaker than that.

U.S. economic growth slowed more sharply than initially thought in the fourth quarter ​amid downward revisions to consumer spending and ‌business investment, government data showed on Friday.

Gross domestic product increased at a 0.7% annualized rate last quarter, revised down from the initially reported 1.4% pace, the ​Commerce Department's Bureau of Economic Analysis said ⁠in its second GDP estimate. Economists polled by Reuters had forecast GDP growth would be unrevised at 1.4%.

That's a pretty big revision, so let's look at the report and see why it's even smaller now.

• The downward revision to exports reflected a downward revision to services (led by charges for the use of intellectual property), reflecting updated data from BEA’s International Transactions Accounts.
• The downward revision to consumer spending reflected a downward revision to services that was partly offset by an upward revision to goods. Within services, the largest contributor to the downward revision was health care (both hospital and nursing home services as well as outpatient services), based on new fourth-quarter data from the U.S. Census Bureau Quarterly Services Survey (QSS). Within goods, the upward revisions were widespread, based on revised U.S. Census Bureau Monthly Retail Trade Survey data for November and December.
• Within government, the revision primarily reflected a downward revision to state and local government structures investment, based on revised October and new November and December U.S. Census Bureau Value of Construction Put in Place (VPIP) data.
• Within investment, the revision reflected downward revisions to structures and intellectual property products. The revision to structures was led by manufacturing structures, based on revised October and new November and December U.S. Census Bureau VPIP data. The revision to intellectual property products primarily reflected a downward revision to software, based on new U.S Census Bureau QSS data.

So weaker numbers in several areas as more of the delayed data from Census Bureau reports has come in. Well, outside of spending on goods (which also isn't as impressive, as you'll see).

It also shows that "core" GDP was quite a bit lower than originally reported, as the volatile factors of trade, government spending, and inventory levels weren't the entire reason for that downward revision. Which means that the original reporting of core GDP being 2.0% in Q4 is now a little less than 1.7%.

That downward revision for Q4 also reduced 2025's annual rate of economic growth to 2.1%, the lowest in 3 years and significantly down from 2023's 2.9%, and 2024 2.8%. Along with much higher job growth, that's the "disaster" that Joe Biden left for Trump.

One positive in the GDP report is that the recently released Quarterly Census of Employment and Wages (QCEW) showed that wage growth was generally higher than first reported for July, August and September. That led to upward revisions for income in both the GDP report, and in the income and spending report for January, which also came out last Friday.

But in both the GDP and income/spending reports, the upward revisions in incomes did not also have an upward revision in consumer spending, which has barely grown above the rate of inflation in recent months.

The $81.1 billion increase in current-dollar [Personal Consumption Expenditures] in January reflected an increase of $105.7 billion in spending on services that was partly offset by a decrease of $24.6 billion in spending on goods.

Real PCE increased $17.0 billion (0.1 percent at a monthly rate) in January.

That follows a Q4 increase in real PCEs of 2.0% on an annualized rate, or less than 0.2% a month. Part of that is consumers not feeling as free to spend on things, but another part is due to the fact that prices kept going higher as 2025 ended and 2026 began.

From the preceding month, the PCE price index for January increased 0.3 percent. Excluding food and energy, the PCE price index increased 0.4 percent.

From the same month one year ago, the PCE price index for January increased 2.8 percent. Excluding food and energy, the PCE price index increased 3.1 percent from one year ago.

Which means prices as measured by the PCE index (which we are told is what the Federal Reserve looks at the most when judging what inflation is) have increased more in the first 12 months of Trump 2.0 than they did under the last year of Joe Biden's presidency (a time when prices were allegedly rising at an unacceptable amount).

And this is back in January, before the average US gas price went up 75 cents a gallon over the last 2 weeks. So year-over-year inflation is likely to go higher than 3% for at least the next few months, while wage growth has gone back down from the Q3 peak to below the levels we were at for the start of 2025.

These reports confirm that we were already in a slowdown for growth at the end of 2025 and the start of 2026. And that's before we foolishly started to bomb Iran without any plan for what might come after we decided to do so. Both militarily, and economically.

2026 budget deficit goes over $1 trillion in February. And it'll be higher in March

The official numbers come out from the US Treasury tomorrow, but the Congressional Budget Office has already released its budget numbers through February, and we are already at a 13-figure budget deficit for FY 2026.

The U.S. Treasury’s borrowing showed no signs of slowing as the U.S. headed deeper into fiscal year 2026, with the Congressional Budget Office (CBO) reporting that another $1 trillion was added to the federal deficit in the first five months of the year….

Of course, with more borrowing comes higher interest costs on the debt. Between October 2025 (when the 2026 fiscal year started) and February, the Treasury spent an additional $31 billion on net interest on public debt, compared to the prior year. As a result, in just five months, the Treasury forked out a total of $433 billion to service public debt, which is now nearing $38.9 trillion.

The CBO said that outlays for interest increased “because the debt was larger than it was in the first five months of fiscal year 2025 and because of higher long-term interest rates.” It added: “Declines in short-term interest rates partially mitigated the overall rise in interest payments.”

Despite the eye-watering sums, the deficit was actually an improvement on last year’s borrowing. For the same period (October 2024 to February 2025), the government needed to borrow an additional $142 billion compared to this year’s figure.

The CBO mentions that the reason the deficit has shrunk by that $142 billion vs 2025 is because of an 11% increase in receipts through February.

But that progress on reducing the deficit is likely to end in a few months. One reason why is that the thing that has caused some of that increase in goverment receipts was recently ruled illegal by the US Supreme Court. Trump's tariff policy led to an increase in customs duties for the first 5 months of this fiscal year that outpaces the year-to-date increase in individual income taxes and payroll taxes.

Now those tariffs won’t be collected (although Trump threw a tantrum after the SCOTUS decision and claimed he put in new and higher tariffs) and may have to be paid back. The CBO mostly ignored Trump's new tariffs, and recently explained the fiscal costs of SCOTUS' decision..

CBO has regularly updated Congress about how changes in tariff policy affects projected revenues. In a November blog post and in The Budget and Economic Outlook: 2026 to 2036, we discussed the effects of trade policies in place as of November 2025. On February 20, 2026, the Supreme Court ruled that the Administration could not impose tariffs under the authority of the International Emergency Economic Powers Act (IEEPA). The Administration terminated those tariffs shortly after. (Other tariffs imposed last year, such as the product-specific tariffs implemented under section 232 of the Trade Expansion Act of 1962, remain in effect.) Revenue collected under IEEPA authority accounted for roughly 50 percent of the approximately $300 billion in total customs duties collected between January 2025 and February 20, 2026.

As a result of that ruling, we estimate the following:

The effective tariff rate (ETR) on imported goods is lower by 8 percentage points.
Primary deficits, not accounting for changes to the economy, will be $1.6 trillion larger over the 2026–2036 period than they were in the projections we reported in February.
Less tariff revenue means that the federal government needs to borrow more, so outlays for interest will be $0.4 trillion higher than previously projected. That results in an increase in total deficits of $2.0 trillion over the 2026–2036 period.

Another item that’s going to grow the deficit is Trump/GOP Tax Scam 2.0. Most of that hasn't shown up in the budget numbers yet, because the amount of income taxes withheld from paychecks has never changed. But many of the new provisions kicked in for tax year 2025, so there will likely be larger income tax refunds as people file. That’s certainly been the case so far, as the IRS says the average tax refund is up by $360 and total refunds have increased by $11.7 billion through the end of February.

This increase in refunds will likely grow to something a lot more than $11.7 billion during March, but it also likely will increase the deficit as those refunds are paid out. Too bad for Trump/GOP that the higher gas and oil prices we've already seen will offset a lot of the extra money being sent back in refunds.

"Bloomberg Economics estimates that the oil breakeven price for the OBBB Act's tax refunds is $83/barrel ... meaning oil at $83 would be enough to wipe out the average gains to households coming from refunds" (via Schwab / Gordon)

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— Nicholas Brown (@nicholasabrown.bsky.social) March 10, 2026 at 12:31 PM

Add in the increased health insurance premiums and other higher costs that people are already dealing with in 2026, and I'm not counting on the bump in economic activity that GOPs were hoping for in tax filing season. But the deficit will still go up from the higher refunds.

And oh yeah, this month's military adventures against Iran also have a cost. The Center for Strategic and International Studies estimated that the first 4 days of the war cost $3.7 billion, and 1 week later, that price tag would be at around $10 billion at the same pace. Granted, we could still pay for that without adding to the military budget, because the US Department of Defense is already getting $41 billion in additional funding for Fiscal Year 2026 from Trump/GOP’s Big Bunch of Bollocks that got signed into law in July.

But here's Wisconsin Congressman/Insurrectionist Asshole Scott Fitzgerald saying that he expects a supplemental funding bill for the war in the "near future", which would add even more to the deficit to pay for this idiocy!

So those are three items that are likely to raise our deficit well past the $1 trillion that it's already at for FY 2026, and last month's CBO estimates of a $1.85 trillion deficit when the fiscal year ends on Sept 30 already will likely need to be revised higher.

We haven't seen the massive deficits cause inflation by itself, or a major increase in interest rates because so much debt that needs to be taken up. But if you're pissing off a large amount of the world, and you lose possible buyers of debt as a result, that'll raise rates. And if you're printing money like it's going out of style, it's not going to do much to slow inflation past the 2.5%-3% range we were in before oil prices went through the roof.

Anyone who still thinks GOPs are better on the economy or on "fiscal responsibility" in 2026 is an absolute fool. And there isn't a good way out of this situation.