US employers added a surprisingly strong 178,000 jobs last month, rebounding from a weak February

The unemployment rate was down from 4.4% in February. That is partly because the labor force — those working and looking for work — dropped by 396,000 in March so fewer people were competing for jobs. In fact, the percentage of people in the labor force dropped to 61.9% last month, the lowest since November 2021.

Health care companies added 76,400 jobs last month, boosted by the return of 31,000 Kaiser Permanente employees to work after the end of a strike in February. Factories added 15,000 jobs last month but have still shed jobs for 14 of the last 16 months. Construction companies added 26,000 jobs, probably partly because of warmer weather last month.

Average hourly wages were up 0.2% from February. Compared to March 2025, they were up 3.5% — the smallest gain since May 2021 and one consistent with the Federal Reserve's 2% annual inflation target.

Labor Department revisions shaved 7,000 jobs off combined January and February payrolls.

The U.S. job market has been in a slump over the past year. Most economists say the impact of the war and higher energy prices was probably not fully reflected in the March jobs numbers.

“The data is mostly backward-looking, and likely does not incorporate any impact from the recent rise in energy prices, or other risks related to the war in Iran,’’ Thomas Simons, chief U.S. economist with the investment firm Jefferies, wrote in a commentary.

Diane Swonk, chief economist at the accounting firm KPMG, said that the economy is getting a lift from big tax refunds made possible by President Donald Trump’s 2025 tax cuts. “But those are now being eaten up by higher energy costs,’’ she said.

Last year, employers added an average of just 9,700 jobs a month, the weakest hiring outside a recession since 2002. Businesses have been reluctant to bring on new workers partly because of uncertainty arising from President Donald Trump’s tariffs on imports and crackdown on immigration. One measure released by the Labor Department on Monday showed the weakest hiring since April 2020 – in the middle of COVID-19 lockdowns.

But firms have also been reluctant to let go of their existing employees, creating what economists describe as a “no-hire, no-fire’’ scenario that locks young applicants out of the job market. At the same time, there are growing worries that artificial intelligence is taking entry-level jobs.

New jobs are heavily concentrated in health care and social assistance (which includes day care and vocational rehabilitation centers). That combined category accounted for more than half the jobs created last month. The trend reflects an aging U.S. population. A graying Japan saw the same thing in the early 2010s, Vanguard economist Adam Schickling wrote in a commentary ahead of Friday's jobs report.

“The larger-than-expected rebound in nonfarm payrolls in March mainly reflects a reversal of the strike and weather effects that weighed on hiring in February, rather than being a sign that the labor market is rapidly gaining momentum,” said Stephen Brown, chief North America economist at Capital Economics. Citing higher oil prices, he warned of the risk that "the hit to consumers’ purchasing power will weigh on demand and therefore hiring in the near term.''

March’s unexpectedly strong hiring is likely to ease pressure on the Fed policymakers to cut interest rates right away to help the job market, giving them time to assess what impact higher energy prices are having on overall inflation.

Worries about the fallout from the war are likely to limit job gains for awhile. “It’s the nature of uncertainties,’’ said Olu Sonola, U.S. head of research at Fitch Ratings. “Companies typically respond by holding back’’ on hiring decisions.

A lot will depend on how long the conflict lasts and what happens to oil prices. The price of benchmark American crude oil closed just below $112 a barrel Thursday. “If that’s $140 next month,″ Sonola said, “God knows what’s going to happen.’’

Mai Truong is the founder of Bo & Mei, which makes games and puzzles designed to celebrate Asian heritage. She’s currently preparing for this year’s holiday shopping season and assessing her hiring plans — but she’s facing lots of unknowns.

The Brooklyn, New York-based company, which had sales of under $500,000 last year, had to pay tens of thousands of dollars in tariffs last year. Truong is not sure what her tariff bill will be this year and whether she will be able to get a refund after the Supreme Court struck down some of Trump's tariffs. The Iran war is also creating unforeseen costs including higher shipping expenses.

Truong is her company's only full-time employee. But she typically hires a couple of contractors, who work in operations, marketing and other areas, to help in the months heading to Christmas.

“It makes everything feel very uncertain,” she said. “On the other hand, there’s so little you can do with the volatility. You just have to stay the course and kind of deal with the variables as they become more clear.”

Anne D'Innocenzio reported from New York.