Hiring picks up but Iran war poses risks for job market
A ‘currently hiring’ sign is seen in the window of a Manhattan business on January 9, 2026 in New York City.
Spencer Platt | Getty Images
Federal labor market data Published on Tuesday It suggests the frozen U.S. job market may be starting to thaw, but the economic consequences of the Iran war threaten to stall that momentum, labor economists say.
“Is the hiring recession finally over? There are encouraging signs,” Heather Long, chief economist at Navy Federal Credit Union, wrote in an email.
“The biggest concern is that the war in Iran could stall much-needed progress in the labor market,” he wrote.
Job market ‘may be stabilizing’
The labor market is the so-called “The “low-hire, low-fire” mode for more than a year has been characterized by low rates of hiring, firing and voluntary layoffs among workers.
The result was a frozen market that offered few opportunities to job seekers or new entrants to the labor pool; It’s a sharp turnaround from the “great quit” period of 2021 and 2022, when job openings reached all-time highs and workers left their jobs for new opportunities in record numbers, economists said.
However, there have been signs of a recent rebound in activity, possibly as a byproduct of businesses feeling more certainty about economic policies like tariffs and interest rates, said Nicole Bachaud, a labor economist at ZipRecruiter.
recruitment rate The rate among employers jumped to 3.5% in March 2026, according to data released Tuesday by the U.S. Bureau of Labor Statistics; This was the fastest hiring pace in two years and was higher than 3.1% in February.
Examining the three-month average of the hiring rate, it “is essentially trending flat from where it entered the year — suggesting it has potentially found a bottom after four years of declines,” Matthew Martin, senior U.S. economist at Oxford Economics, wrote in a research note Tuesday, examining the three-month average of the hiring rate.
Hiring is also happening in industries other than health care “for the first time in a long time,” Long wrote.
Hiring spread across several industries: Employers in transportation, warehousing and utilities hired 108,000 workers in March, according to the BLS, while professional and business services hired 165,000 and accommodation and food services hired 124,000.
“After a challenging year with almost no hiring outside the healthcare sector, the labor market appears to be increasingly stabilizing,” Long wrote.
In addition, separation rate It rose marginally to 2% in March from 1.9% in February, according to BLS data. Workers often leave jobs to take new jobs, so economists generally view the turnover rate as a rough pulse of their confidence in finding a new job.
And while 2025 is the worst year for job gains outside of a recession in more than 20 years, employers added 178,000 new jobs in March, according to a separate BLS report published in April; this was the highest monthly total since 2024.
“I would say the labor market is heating up again,” Bachaud said. “We were in a very frozen, stagnant state, and these things are starting to ease and warm up again.”
“The impact of the Iran war and how high gas prices are making their way through the labor market is a big asterisk,” he said.
The impact of the Iran war on the job market
Premium gasoline prices over $6 per gallon and diesel fuel prices over $7 per gallon are displayed outside a Shell gas station in West Hollywood, California, on April 14, 2026.
Patrick T. Fallon | AFP | Getty Images
The ongoing conflict in the Middle East has triggered an oil supply shock, increasing energy prices overall.
Average US gasoline prices increased to $4.45 per gallon As of Monday, it was up from $2.94 per gallon on Feb. 23, just before the war began, according to the U.S. Energy Information Administration; an increase of approximately 51% in roughly two months.
While it’s “too early to see any negative spillover effects” from the war, higher oil prices threaten to dampen consumer demand by reducing households’ spending power, Martin wrote in federal labor market data released Tuesday.
In addition, he wrote, “businesses will further pull back from hiring plans due to increased uncertainty,” thereby “delaying a sustainable recovery in hiring.”
“The US/Israel-Iran war will test the labor market,” Martin wrote.
Economists also noted that there were some worrying signs in the employment market that dampened optimism somewhat.
For example, although the overall unemployment rate in the United States is relatively low by historical standards, the share of unemployed workers who are considered “long-term unemployed” is increasing.
Approximately 25% of unemployed workers Long-term unemployed people in MarchThis means they have been unemployed for at least six months, according to BLS data. This is above the last low of around 18% in February 2023.
“A lot of unemployed people are facing this low-hiring environment, trying to get back into the labor market, and they can’t find ways to get back,” said Cory Stahle, senior economist at job site Indeed.
Overall, he said, there are reasons for both optimism and concern for job seekers. He said the U.S. job market has remained “remarkably stable” despite some headwinds.
But “the longer [war] “If this continues, it will put a strain on the economy,” Stahle said.
