Despite March’s strong job gains, labor trends suggest talent shortages ahead

We are so back?

After a dour jobs report in February, March delivered surprisingly strong gains for the US labor market, according to the Bureau of Labor Statistics’ latest employment situation report. In fact, March’s job growth marked the highest monthly gains so far for President Trump’s second administration.

However, looking beyond top-line payroll gains, something concerning is brewing within the economy, as people out of work gradually exit the labor market. That could be worrying for employers down the line, should job gains persist, one expert said.

Diving into the data. Employers added 178,000 jobs in March, beating economists’ expectations of 60,000. Healthcare, recovering from strikes earlier this winter, led in job growth by industry, adding 76,000 jobs. That was followed by construction, which added 26,00 jobs, and transportation and warehousing, which added 21,000.

Additionally, the topline unemployment rate fell slightly from 4.4% to 4.3% in March. Looking at the topline job gains and unemployment may suggest “a really good report,” Nicole Bachaud, a labor economist at ZipRecruiter, told HR Brew. Looking under the hood, however, shows a different picture. “When you look underneath at some of the underlying foundational numbers, it tells a quite different story.”

For people who have a job, the labor market has remained fairly stable. Layoffs have changed little month over month, per the BLS’s latest JOLTS data. The employment population ratio for prime working age individuals (ages 25 to 54) has also remained elevated at 80.7%.

“These folks have barely been affected by labor market cooling—low hiring, low firing keeps people who already have a job relatively secure,” Guy Berger, a labor economist and senior fellow at the Burning Glass Institute, wrote on LinkedIn.

People who are out of work, however, face a different reality. The number of people unemployed long term (approximated a little over six months or longer) declined slightly month over month, by 78,000 to 1.82 million. However, that cohort has grown by 322,000 over the past year, and now make up 25.4% of all unemployed people. The share of those unemployed long term may also be ticking down simply because people are opting to exit the labor market instead of attempting to keep looking for a job, Bachaud said.

Relatedly, the share of people marginally attached to the labor force—meaning they looked for a job sometime in the last year, but not in the four weeks prior to taking the BLS’s survey and, therefore, are not counted as unemployed—rose by 325,000 month over month to 1.9 million. And the share of discouraged workers—a subset of the marginally attached labor force, but believe there are no jobs available for them—rose by 144,000 month over month to 510,000.

Moreover, with fewer foreign-born workers in the US due to the Trump administration’s immigration crackdown, the labor force participation rate fell to 61.9%, the lowest it’s been since late 2021, partly because native-born workers tend to have lower labor participation rates than foreign-born workers, Bachaud said. This will impact industries that depend on skilled immigrant workers, and where native-born workers are unable or unwilling to fill jobs, such as construction, manufacturing, and mining, she added.

“We’re really seeing the pool of available workers shrinking quite dramatically,” Bachaud said. “This is going to create more challenges moving forward, as job growth does continue to increase, we’re going to find ourselves in a much tighter labor market later on in 2026.”

Zoom out. With a reacceleration in job gains in January (when the economy added 160,000) and March, Bachaud expects that job growth could continue throughout 2026. However, with a shrinking labor pool, employers will have difficulty finding the skilled talent to fill open roles.

Right now, TA professionals should focus on building talent pipelines, and training and skilling workers to fill vacant roles, Bachaud said. “Those who prepare now for what that next phase of a tighter labor market looks like, that’s who’s going to become the winners and who’s going to come out on top.”

There’s one problem, though: Employers want to recruit talent that already has the skills they need. They don’t want to invest in training new hires.

“Companies want that right talent. Precision matters,” Raj Namboothiry, SVP at Manpower US, previously told HR Brew. “There’s less appetite for, ‘Okay, we’re going to train you.’”

But Bachaud warned that HR leaders who neglect to plan for future talent shortages will regret it, especially once the majority of boomers have retired, creating more labor shortages.

“As this retirement class kind of gets closer and more things start to open up, I think businesses are maybe gonna wish they had focused more on developing the next set of talents, when that tightness becomes more of a challenge,” she said.