Iran Conflict Triggers Unexpected Wall Street Reaction as First Jobs Report Stuns Investors

The latest jobs report, released amid escalating tensions in the Middle East, has reverberated through Wall Street with significant impact.

According to the U.S. Bureau of Labor Statistics, total employment rose by 178,000 in March, while the unemployment rate remained relatively stable at 4.3 percent.

Substantial job growth was noted in sectors such as healthcare, construction, and transportation and warehousing. The healthcare sector alone accounted for nearly 90,000 of these new positions, bolstered by the return of approximately 32,000 nurses who had previously been on strike. Conversely, employment within the federal government continued its downward trend.

Economists surveyed by Bloomberg had anticipated a more modest increase of 65,000 jobs for March, making the report’s findings somewhat unexpected.

Adjustments to job figures from previous months presented a mixed picture. January’s employment increase was revised upward by 34,000 to 160,000, while February’s job losses were revised to a more significant decline of 133,000. These revisions ultimately result in 7,000 fewer jobs than initially estimated for the combined period.

Wall Street reacted to the news with excitement on Friday morning. Though the stock market is closed today in observance of the Easter holiday, the bond market remains open until midday. The S&P 500 was up slightly in futures, as was Nasdaq. The Dow Jones, however, dropped 0.13 percent. 

American employers unexpectedly cut 92,000 jobs in February, a sign that the labor market remained under significant strain. 

Meanwhile, a report yesterday from Challenger, Gray & Christmas showed layoffs are already climbing. US employers announced 60,620 job cuts in March – up 25 percent on the month – and artificial intelligence linked to one in four of them. 

The first jobs report to be dropped since war broke out in the Middle East spells out more trouble to come for Americans this year (pictured: an explosion in Tehran)

The March jobs report, which was released at 8:30 am on Friday, was predicted to show a gain of 65,000 jobs

Nancy Vanden Houten, lead US economist at Oxford Economics, said she expected the Iran war – and the resulting surge in oil and gasoline prices – to weaken the job market. 

But ‘the impact of the war might not be felt for some time,’ she wrote in a commentary. Changes in businesses´ plans to hire and invest will take time to show up in the economic data.

Moreover, big income tax refunds this spring will keep consumers spending and drive economic activity. But, she added, ‘another month or two of reasonably good labor market and economic data won´t be a reason to conclude that the economy isn´t facing downside risks related to the war.’

Adam Schickling, senior economist at the investment firm Vanguard, expected US unemployment to rise to 4.6 percent at year’s end; before the Iran war, he’d expected joblessness to dip to 4.2 percent.  

The US job market is already showing signs of weakness.

Over the past year, employers added an average of only 9,700 jobs per month – the slowest pace of hiring outside a recession since 2002. 

Businesses have been cautious about bringing on new workers, partly due to uncertainty tied to President Donald Trump’s trade and immigration policies. 

A Labor Department report released Monday even showed hiring at its lowest level since April 2020, during the height of COVID-19 lockdowns.

The average cost of a gallon of gasoline topped 4 US dollar nationwide on March 31 as the war in Iran continues to drive up oil costs

Businesses have been cautious about bringing on new workers, partly due to uncertainty tied to President Donald Trump’s trade and immigration policies

A Labor Department report released Monday even showed hiring at its lowest level since April 2020, during the height of COVID-19 lockdowns

At the same time, companies have been holding on to their current employees, creating what economists call a ‘no-hire, no-fire’ environment. 

This dynamic makes it harder for younger job seekers to break into the workforce. Concerns are also growing that artificial intelligence is displacing entry-level positions.

Job growth has been largely concentrated in healthcare and social assistance, a category that includes services like daycare and vocational rehabilitation. 

Outside of that sector, private employers have collectively eliminated 285,000 jobs over the past year.

Looking ahead, Vanguard’s Schickling expects healthcare and social assistance to make up about 45 percent of new jobs over the next four years, compared with a historical average of 20 percent. 

This shift reflects the aging US population – a pattern similar to what Japan experienced in the early 2010s, according to Schickling.