But the Trump administration's new tariffs could test labor market resilience
More jobs were added to the US economy in March than many economists expected – although a potential tariff war could make growth in future months challenging.
The US Bureau of Labor Statistics released its data for March on Friday, showing total nonfarm payroll employment rose by 228,000. However, the unemployment rate slightly increased to 4.2%, and wage growth slowed to 3.8%.
The March numbers mark the final job market reading before the imposition of the Trump administration’s wave of global tariffs, which could paint a different picture in the future.
Trump announced levies on Wednesday on imports from dozens of countries. He imposed a 10% baseline tax on imports from all countries, a 34% tax on imports from China, and a 20% tax on imports from the European Union.
While some countries are taking a wait-and-see approach, some countries are fighting back. China announced a 34% reciprocal tariff on US goods on Friday.
Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association (MBA), noted that the report may not accurately reflect the current situation due to the implemented tariffs.
“In light of the tariff announcements this week and the sharp drop in stock markets around the world in response, these data are likely not capturing the moment with respect to the actual strength of the economy,” Fratantoni said.
Some industries saw job gains while federal jobs sharply declined
Healthcare, social assistance, transportation, and warehousing industries experienced job gains in the month. The number of unemployed Americans sat at 7.1 million at the end of the month, data showed, and the department noted that the unemployment percentage has remained steady between 4.0% and 4.2% since May 2024.
However, federal employment decreased thanks to the terminations initiated by the Trump Administration and the Department of Government Efficiency (DOGE), declining by 4,000 in March following a loss of 11,000 in February. Employees on paid leave or receiving ongoing severance pay are counted as employed, so this number could increase as those come to an end.
“Most sectors within the economy showed modest job growth,” Fratantoni said. “Unsurprisingly, given the DOGE headlines, federal government payrolls decreased by 4,000 over the month, with further decreases anticipated.”
Fratantoni also noted that many people who have recently lost jobs may be struggling to find a new position with an equivalent salary.
“Last month, there was a sharper increase in the U-6 measure of underemployment,” Fratantoni said. “That metric remained elevated at 7.9% in March. This increase signals that many who have lost jobs are having difficulties regaining full employment again, but are able to get part-time or other work.”
Fratantoni told Mortgage Professional America earlier this week he expected the tariffs to impact the new home mortgage market directly.
“This is going to make it harder for the home buyer,” Fratantoni said. “And you would expect that a builder is going to pass those costs through to the buyer. So that impact is pretty clear.”
He also said he expected interest rates to decline in the wake of the tariffs. The 10-year treasury fell below 4% on Friday to 3.95%, its lowest level since early January. These rates may continue to decline if the Federal Reserve maintains its current rate-cutting stance.
How will the Federal Reserve respond?
Despite a positive jobs report, the potential tariff war and its negative effects on world markets have led the Federal Reserve to consider more aggressive actions.
Following Trump's global tariffs, markets anticipate the Fed will cut rates by 100 basis points in 2025 to counter recession fears.https://t.co/vjnxl4B2k0
— Mortgage Professional America Magazine (@MPAMagazineUS) April 4, 2025
The Fed is considering rate reductions totaling 100 basis points before the end of the year, in what would likely be four 25-point cuts. The original expectation was that the Fed would cut rates twice this year. That forecast was increased to three cuts earlier this week and has now been bumped up to four to try to mitigate the negative impact of the tariffs.
Fratantoni believes that while the Fed may take further action, it will also closely monitor inflation in the process.
“The Federal Reserve, in data-dependent mode, is likely to remain cautious with respect to any rate cuts so long as inflation is above target, and the job market data continues to come in strong,” Fratantoni said.
He notes that job gains previously announced in January and February were revised down by 48,000. However, he felt the job market was largely unchanged in March.
“On net, the overall picture changed little during the time this data was collected,” Fratantoni said. “The job market was softening somewhat, but there were no indications of a sudden slowdown.”
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