Hiring picks up but Iran war poses risks for job market

Federal labor market data issued Tuesday suggests the frozen U.S. job market may be starting to thaw — but the economic fallout from the Iran war threatens to stall that momentum, according to labor economists.

“Is the hiring recession finally over? There are encouraging signs,” Heather Long, chief economist at Navy Federal Credit Union, wrote in an e-mail.

“The big concern is the war in Iran could halt that much needed progress in the labor market,” she wrote.

The labor market has been in a so-called “low hire, low fire” mode for more than a year, characterized by a low rate of hiring, layoffs and voluntary quits among workers.

The result was a frozen market that offered few opportunities to job seekers or new entrants to the labor pool — a stark turnaround from the “great resignation” era of 2021 and 2022, when job openings hit all-time highs and workers left their jobs for new opportunities in record numbers, economists said.

However, there have been recent signs of a pickup in activity, likely a byproduct of businesses feeling more certainty about economic policies like tariffs and interest rates, said Nicole Bachaud, a labor economist at ZipRecruiter.

The hiring rate among employers jumped to 3.5% in March 2026 — the fastest pace of hiring in two years and up from 3.1% in February, according to data published Tuesday by the U.S. Bureau of Labor Statistics.

When examining the three-month average of the hiring rate, it is “essentially flat from where it entered the year — suggesting it has potentially found a bottom after four years of declines,” Matthew Martin, a senior U.S. economist at Oxford Economics, wrote in a research note Tuesday.

Hiring also occurred in industries other than healthcare for “the first time in a long time,” Long wrote.

Hiring was spread across a few industries: Employers in the transportation, warehousing and utilities sector hired 108,000 workers in March, while professional and business services hired 165,000 and accommodation and food services added 124,000, according to the BLS.

“It looks more and more like the labor market may be stabilizing after a rough year of almost no hiring outside of the healthcare field,” Long wrote.

Additionally, the quits rate ticked up marginally to 2% in March from 1.9% in February, according to BLS data. Workers typically quit to take new jobs, so economists generally view the quits rate as a rough pulse of their confidence in finding a new gig.

Further, while 2025 was the worst year for job gains outside of a recession in more than 20 years, employers added 178,000 new jobs in March, the highest monthly total since 2024, according to a separate BLS report issued in April.

“The labor market is heating back up, I’d say,” Bachaud said. “We were in this very frozen, stagnant state, and those things are starting to ease and warm back up.”

“A big asterisk is the impact of the Iran war and how high gas prices are making their way through the labor market,” she said.

The ongoing Middle East conflict has triggered an oil-supply shock, raising energy prices broadly.

Average U.S. gasoline prices have increased to $4.45 per gallon as of Monday, up from $2.94 per gallon on Feb. 23, just before the war started, according to the U.S. Energy Information Administration — an increase of about 51% in roughly two months.

While it’s “too soon to see any negative spillover effects” from the war in the federal labor market data issued Tuesday, higher oil prices threaten to reduce consumer demand by reducing households’ spending power, Martin wrote.

Additionally, “businesses are likely to pull back further on hiring intentions” due to increased uncertainty and therefore “delay a sustained rebound in the hiring rate,” he wrote.

“The US/Israel-Iran war will test the labor market,” Martin wrote.

There are also some concerning signs in the job market that slightly temper the optimism, economists said.

For example, while the overall U.S. unemployment rate has been relatively low by historical standards, the share of jobless workers who are considered “long-term unemployed” has gradually crept upward.

About 25% of jobless workers were long-term unemployed in March, meaning they’ve been out of work for at least six months, according to BLS data. That’s up from a recent low of about 18% in February 2023.

“Many unemployed people are facing this low-hire environment, where they’re trying to get back into the labor market, and they’re just not finding those doors to getting back in,” said Cory Stahle, a senior economist at Indeed, a job site.

Overall, there are both reasons for optimism and concern for job seekers, he said. The U.S. job market has been able to remain “remarkably stable” despite a number of headwinds, he said.

However, “the longer that [war] goes on, the longer that will weigh on the economy,” Stahle said.