March jobs report likely to show gradual hiring drop but tariff uncertainty a wild card

The March jobs report, due out Friday, is set to provide a final snapshot of a relatively placid U.S. labor market before President Trump this week revealed sweeping import tariffs that have rocked global markets.

That announcement could mean that employers who so far have simply pulled back hiring will start to lay off workers in significant numbers, some economists say.

The March survey, forecasters say, will likely reveal a continuing slowdown in job growth that reflects the fading of a post-pandemic hiring burst as well as some growing business uncertainty about the import fees.

But forecasters say concerns about the levies could have a bigger impact than anticipated.

What does the jobs report show?

Economists predict the report will reveal that employers added 138,000 jobs last month, according to the median estimate of a Bloomberg survey, down from 151,000 in February and an average 168,000 in 2024.

Federal employment likely fell by 25,000 – following a drop of 10,000 the previous month - due to layoffs by the Department of Government Efficiency (DOGE), Morgan Stanley estimates. But those cuts were probably offset by a recovery of jobs in leisure and hospitality, which shed workers in January and February as cold weather held down customer traffic at restaurants and hotels, according to Bank of America.

Several economists said payroll gains could be weaker than expected amid fears of a global trade war.

“Unprecedented policy uncertainty might have weighed on hiring more than we think,” Bank of America wrote in a note to clients.

Are a lot of companies laying off?

Initial jobless claims, a reliable gauge of layoffs, fell to a historically low 219,000 in the week ended Saturday. But continuing claims jumped by 56,000 to the highest level since November 2021, the Labor Department said Thursday. That means workers who lose their jobs are staying unemployed longer because companies aren’t hiring.

Employers 'dragging their feet'

Raj Namboothiry, senior vice president of Manpower North America, a leading staffing firm, described a “collective paralysis” in the job market.

“Employers aren’t canceling hiring initiatives outright, but they’re dragging their feet at every stage of the process,” Namboothiry said, adding that job openings are down 10% compared to a year ago. “Decision timeline that used to take days now take weeks or months. The uncertainty around tariffs and economic policy has everyone second-guessing themselves and is absolutely affecting hiring confidence.”

And while many companies are leaving vacancies unfilled, “workers are increasingly reluctant to switch jobs,” he said. “The result is a market that appears stable on paper but feels increasingly stagnant in practice.”

Is job hiring slowing down?

Surveys show businesses are increasingly hunkering down. In February, the share of those planning capital outlays fell to the lowest level since April 2020, according to a monthly poll of small firms by the National Federation of Independent Business.

And about a quarter of chief financial officers said changes to trade policy would prompt them to cut hiring and capital spending plans this year, according to a first-quarter survey by Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta.

What's the latest on tariffs?

Trump has been rolling out tariffs the past two months – on steel and aluminum and Chinese imports, for example. But he dramatically ratcheted up the stakes on Wednesday, with 10% duties on all imports as well as additional much higher fees on 60 countries, and 25% levies on all imported cars and light trucks. Top forecasters expect inflation to rise again while the economy slows to a near-standstill and possibly topples into a recession.

Now that Trump has announced those far-reaching duties, layoffs are likely to pick up, say forecasters at High Frequency Economics and Pantheon Macroeconomics. After widespread pandemic-related labor shortages, companies have been hoarding workers on the hope the U.S. can avoid an economic slump, said Carl Weinberg, chief economist at High Frequency Economics.

“Now that firms have seen the tariffs and can smell the economic downturn lurking just around the corner, we expect layoffs will commence, “ Weinberg wrote to clients.

That could weigh more heavily on the economy and labor market in coming months as laid off workers struggle to pay bills and pull back spending.

“It’s one thing if businesses just put hiring plans on hold,” said Richard Moody, chief economist of Regions Financial. “It’s another thing if they start laying people off.”

'Worse than I thought'

In recent months, Cat & Cloud Coffee, based in Santa Cruz, has turned down offers to open new cafes in the city because of the uncertainty generated by Trump’s tariffs, said company owner Charles Jack.

The company roasts 300,000 pounds of coffee a year that it sells at four of its own local cafes, as well as to cafes, offices and grocery stores around the country. Cat & Cloud has no choice but to import the coffee from countries such as Columbia, Guatemala and Honduras.

“Our product can’t be made in the U.S.,” he said,

A new café, meanwhile, would have meant the addition of 15 employees, Jack said. Instead, the company has frozen all hiring.

Now, Trump’s announcement of reciprocal tariffs will mean a 10% duty on the coffee he orders from overseas, adding $120,000 to the $1.2 million he already pays.

“It’s worse than I thought,” Jack said. “I thought it would be more targeted."

Jack said he’ll have to raise coffee prices by 25 cents to 50 cents per cup and is unsure how that will affect sales. He said he’ll have to at least consider trimming staff, and if the tariffs dampen the economy so much that consumers cut their coffee purchases more broadly, “then we’re going to have to reduce employment” even further.

Waiting and seeing

Some businesses are still in wait-and-see mode, pushing ahead with hiring plans because many of their customers appear unaffected by the charges.

“We are instructing our sales team to focus on business that will not be directly affected by the tariffs,” said Tina Hamilton, CEO of myHR Partner, a human  resources outsourcing firm that plans to add nine employees to its staff of 41 this year.

“Demand is extremely high,” Hamilton said. “There is no evidence that we have a reason to pull back.”

But, she added, “If everyone reacts by pulling back, then we will manifest the very fears we are attempting to avoid.”

Rishi Khanna, CEO of ISHIR, a Dallas-based software development company, said much of its sales are from financial services and healthcare companies. But the rest is from ecommerce firms that he expects to be socked by tariffs, possibly leading to higher prices and lower customer demand.

“This could impact our clients’ businesses and, in turn, our hiring plans,” Khanna said.

He expects to add 14 employees to his staff of 89 but that plan is “now depending on the economy,” Khanna said.

This story was updated to add new information.