Welcome to the month of meteorological musical chairs where spring strains to break free from winter’s clutches. 🌱 Did you know the word ‘March’ comes from the Roman god Mars? March (or ‘Martius’ in Latin) was so named as it was historically associated with the resumption of warfare after winter’s pause. 😬
On a less bellicose note, the Roman calendar considered March the first month of the year, signifying new beginnings with the arrival of the spring equinox. I’ll lean a little harder into the ‘new beginnings’ take by organizing my March seed starting plans and planning additions to my native pollinator garden. Are you itching to get out into the dirt, too? Drop me a line and let me know what are your must-do garden tasks this month. 🌷
Speaking of strategic moves, Fed officials are going to have their work cut out for them. Let’s get into it.
Decent, but “already outdated” remarked one economist on February’s jobs report. Employment rose by 151,000 in February, just shy of the 168,000 average over the prior twelve months. The BLS data largely precedes recent policy changes in late February, and stocks plummeted on Monday following widespread economic anxiety as President Trump did not explicitly rule out the possibility of recession. With that caveat, last week’s report painted a picture of a robust labor market that shows early signs of softening.: unemployment rate ticked up to 4.1%, the employment-to-population ratio among prime-age workers fell 0.2 percentage point to 80.5%, average workweek hours dropped, and the number of multiple jobholders was on the rise. February marks more than 3 years of unemployment at or below 4.2%. The last time unemployment was that low for that long was more than half a century ago. Employment growth came in a little under economists’ expectations for a 160,000-job gain, but showed gains over January, a month where wildfires and weather likely affected the numbers. January’s payroll growth was further revised down to 125,000 from 143,000.
Job growth in February was strongest in healthcare and social assistance, with additional gains in finance and construction. The increase of 10,000 construction payrolls was notable but was offset by a decline of 10,000 federal government jobs. Restaurants continued to struggle, losing 27,500 jobs in February after shedding 29,500 jobs in January, the largest monthly decline since the COVID-19 pandemic. Proposed cuts to Medicaid and other social programs could lead to further declines in federal employment and potentially affect private sector firms with federal contracts. Meanwhile, a broader measure of unemployment rose to its highest level in nearly 3.5 years as part-time employment increased significantly. The proportion of workers holding multiple jobs reached its highest point since the Great Recession.
While some experts noted a “palpable sense of relief” at the solid numbers, they also acknowledged the significant uncertainty ahead. “Even in February’s employment release there are telltale signs we need to prepare for hiring conditions to significantly weaken in the coming months,” wrote Economic Outlook Group chief global economist Bernard Baumohlhe. While hiring likely stabilized in the second half of 2024, overall hiring has declined to levels comparable to 2013-2014, when the unemployment rate exceeded 7%. This has created a challenging job market for those seeking new employment. Beyond the disruptions in foreign trade and federal employment, private-sector hiring has significantly slowed from the exceptional pace seen during 2021-2023.
Bloomberg Economics analyst Anna Wong anticipates a decline in hiring at local and state governments, which have been key contributors to overall payroll growth during the past two years. According to outplacement firm Challenger, Gray & Christmas, federal job cuts in February reached 62,000, while total announced job cuts exceeded 172,000—the 12th highest on record.“The economy is off to a slow start under the new president,” Chris Rupkey, chief economist at FwdBonds, wrote in commentary on Friday. “You can’t have mass firings of federal workers and government contractors and think it is not going to mean job losses for the private sector.”
The administration’s deportation policies may be creating additional economic headwinds. Research shows that mass deportations negatively impact the labor market without increasing employment for US citizens. In fact, studies indicate that for every 13 fewer unauthorized immigrants who are working in a local labor market, that leads to 10 fewer US-born workers ,working in that same labor market.
The American consumer’s strength, which sustained the economy throughout 2024, may weaken. Consumer spending declined in January for the first time in nearly two years, marking the largest monthly decrease since February 2021. A recent Conference Board survey indicated a sharp drop in consumer confidence last month. Federal officials have minimized concerns about inflation expectations so far. When asked about consumer inflation expectations in late February, Austan Goolsbee, president of the Federal Reserve Bank of Chicago, stated, “You need at least two or three months for that to count.” Maybe the American people should take JP Morgan Chase CEO Jamie Dimon’s advice on inflation, and just “get over it.”
A significant shift in sentiment about the US economy does appear to be underway. Just over two months ago, the US economy was concluding another strong year, and economists had largely abandoned attempts to predict the next recession. Small business confidence was high as companies anticipated the Trump administration’s deregulation agenda and tax cuts. As 2025 began, the Federal Reserve Bank of Atlanta’s closely watched GDPNow forecast indicated another quarter of growth exceeding long-term potential estimates. However, the economic outlook has changed dramatically in recent days. On Friday, the Atlanta Fed’s monitor plummeted, showing a massive decline of more than 3 percentage points and suggesting a contraction in GDP for the current quarter.
And then, there are the tariffs. According to a new Brookings Institution analysis, more than 5 million Americans work in industries potentially affected by retaliatory tariffs from China and Canada implemented in the past week. Counties that voted for President Donald Trump have a higher proportion of workers in industries targeted by these tariffs. “There’s definitely a bias towards Republican-voting areas,” said Robert Maxim, a fellow at Brookings Metro who worked on the jobs analysis. “I don’t think that’s a coincidence. China and Canada know what they’re doing.” If tariffs increase inflation or prevent it from declining further, the Federal Reserve may not implement additional interest rate cuts this year, even amidst a slowing job market. Reports from Federal Reserve regional branches and small business surveys indicate that uncertainty created by the Trump administration’s rhetoric and actions could be affecting near-term hiring decisions. “Headwinds are mounting,” said Diane Swonk, chief economist at the accounting firm KPMG. “Uncertainty is paralyzing, and it is showing up everywhere.”
The see-sawing on tariffs also has led economic experts to estimate a higher probability of an imminent recession, with 70 out of 74 economists surveyed by Reuters indicating increased risk across the United States, Mexico, and Canada. “Given this is so uncertain and that there are new announcements every hour or so, it’s kind of unclear what the environment is going to look like. It’s hard to deny the risk of a recession has intensified,” said Jonathan Millar, senior US economist at Barclays in New York.
Wednesday’s inflation report showed that the core measure of prices—which excludes food and energy categories—rose 3.1%. This represents the lowest year-over-year reading since 2021 and fell below economists’ expectations of 3.2%. However, the report largely predates President Trump’s recent tariff actions, meaning the full impact won’t be evident until future reports. This data is unlikely to change the Federal Reserve’s decision to maintain current interest rates at next week’s meeting. Federal Reserve Bank of New York President John Williams acknowledged that tariffs will likely contribute to inflation but also emphasized uncertainty around their impact. Additional economic factors include Elon Musk’s federal workforce reductions, immigration restrictions, and potential decreased business investment amid policy uncertainty. According to a growing consensus among economists, these combined factors indicate a slowdown for the world’s largest economy.
Given the recent volatility, predicting future developments has become challenging. Fed officials are scheduled to meet on March 18-19, and financial markets indicate a 97% probability they will maintain current rates. Due to the worsening economic outlook, markets anticipate the central bank will only resume rate cuts in June.
“It’s either the calm before the calm, or the calm before the storm.”
(Sources: Economic Policy Institute, Guy Berger via Substack, CBS News, CNN, Axios, JP Morgan, Reuters, The New York Times, Bloomberg, Challenger Gray, Chloe East et. al, NPR, The Conference Board, Yahoo Finance, The Washington Post, The Wall Street Journal, CME Fedwatch)
What Else for March?
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(Sources: Economic Policy Institute, Gallup, Randstad, MIT Sloan Management Review, SHRM, The Washington Post)
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