The US economy added way more jobs than expected in March, even as federal employment edged down

• The US economy added 228,000 jobs in March, exceeding the forecast.
• The unemployment rate surprisingly increased to 4.2%.
• Confidence in the job market and the economy has fallen.

The US economy added 228,000 jobs in March, far surpassing the forecast, and unemployment unexpectedly jumped.

Job growth was expected to be 137,000, and the unemployment rate was expected to hold steady at 4.1%. Unemployment instead rose to 4.2%, and has consistently been at least 4% for almost a year.

February's job growth was revised from 151,000 to 117,000, and January's job growth was revised from 125,000 to 111,000. Together, that's a revision of 48,000 fewer jobs.

Federal government employment fell by 4,000 in March. DOGE and its unofficial leader Elon Musk have pushed for large-scale federal employment cuts, with a wave of terminations for probationary workers, who were in their roles for only a short period of time, coming in February and early March.

However, a court ruling put a hold on many of those cuts, and the bulk of those workers remain in legal limbo.

Agencies have begun developing more extensive plans to reduce the size of their workforces. Thousands of workers at agencies in the Department of Health and Human Services are expected to see their jobs cut; terminations started Tuesday.

Workers at other agencies are bracing for what's next. Federal government cuts will likely affect the overall job counts in future releases.

The new jobs report also showed wage growth cooled based on year-over-year changes. Average hourly earnings increased from $34.67 in March 2024 to $36 this past month. That 3.8% rise is a slower increase than the 4% year-over-year rise in February.

Amid the rise in unemployment, labor force participation, which includes people working or actively looking for work, increased from 62.4% in February to 62.5% in March.

Americans have been losing confidence in the US economy, adding to an emerging vibecession amid a cooling but still fairly strong labor market.

University of Michigan data shows consumer sentiment has declined for the year's first three months. The Conference Board's Present Situation Index, which is based on what people think about business and job market conditions, took a hit, data up to March shows. Consumers aren't feeling great about what's to come, either.

"Consumers' expectations were especially gloomy, with pessimism about future business conditions deepening and confidence about future employment prospects falling to a 12-year low," Stephanie Guichard, senior economist for global indicators at The Conference Board, said.

The Federal Reserve uses labor market data as a key input for its interest rate decisions. Fed chair Jerome Powell said in a press conference on March 19 after the Federal Open Market Committee decided to hold interest rates steady that unemployment "remains low and has held in a narrow range for the past year," and wage growth is surpassing inflation.

The next scheduled interest rate decision is in May, meaning plenty more data about economic activity will be available before the Committee makes its next call.

CME FedWatch, which estimates the likelihood of future Fed moves based on market trades, shows the chance of rates holding steady or being cut in May is roughly a coin toss. Chances of the Fed holding rose slightly after the report, from about 56% to about 61%.

Powell said in the March press conference after the interest rate decision that the administration is making big changes to trade, immigration, fiscal policy, and regulation and is uncertain about what this will mean for the economy. Trump announced on April 2 his latest tariff plans, which could mean consumers could soon face higher prices.

"We do not need to be in a hurry to adjust our policy stance, and we are well-positioned to wait for greater clarity," Powell said.

This is a developing story. Please check back for updates.