The U.S. added more jobs than expected in March, despite federal layoffs led by Elon Musk‘s DOGE task force, but the good news was largely overshadowed by President Donald Trump‘s latest round of tariffs.
Total employment rose by 228,000 last month, and the unemployment rate increased slightly 4.2%, the Labor Department reported on Friday. The March gain was more than economists expected and well above February’s revised figure of 117,000.
Strong employment growth is usually a positive signal for the housing market, which currently remains near historically weak levels in terms of the number of home sales.
But the latest job report data precedes Trump’s stiff tariffs on virtually all trading parters, which have roiled stock markets and drawn recession warnings from economists, dimming prospects for the housing market.
The Realtor.com® economic research team’s March housing report showed that there were more sellers than a year ago, but pending home sales, an early stage of the transaction process, lagged behind.
“This signals a slower spring for home sales. Buyers grappling with high housing costs and added economic uncertainty are biding their time, for now,” says Realtor.com Chief Economist Danielle Hale.
Employment data also typically influence the bond markets that determine mortgage rates, but the strong jobs report had little visible impact on financial markets.
The major stock indexes opened down more than 2% on Friday, and bond yields continued to fall, signaling that mortgage rates will likely drop.
For the housing market, falling rates could be a silver lining for homebuyers struggling with affordability concerns. But rising uncertainty and fears of economic contraction will likely weigh on homebuyer sentiment, discouraging some from moving forward with a purchase.
Federal workforce shrinks as other sectors grow
The new report is the first to capture the impact of DOGE cuts, and shows that federal government employment declined by 4,000 in March, following a loss of 11,000 jobs in February.
However, those figures don’t include employees on paid leave or receiving ongoing severance pay. According to data collected by recruiting firm Challenger, Gray & Christmas, total DOGE layoffs amounted to more than 216,000 in March.
So far, the DOGE layoffs have not significantly impacted home prices in the Washington, D.C. metro area, according to Bright MLS, the multiple listing service covering the region.
Although new listing activity has risen in the area, the uptick has drawn previously sidelined buyers into the market, according to Bright MLS Chief Economist Lisa Sturtevant.
“Given the tight supply at the beginning of the year, there does not appear to be a risk of major price drops during the spring market, but buyers will have more leverage on price,” says Sturtevant.
Meanwhile, the health care sector added 54,000 jobs in March, while employment in social assistance increased by 24,000. Retail trade added 24,000 jobs, partially reflecting the return of striking workers, and employment in transportation and warehousing rose by 23,000.
“The March jobs report was surprisingly upbeat, but it may be the last strong one for a while. Looking ahead, it is likely job growth will be cooler this spring, typically a time of the year when hiring ramps up,” says Sturtevant.
“Spring is also typically when the housing market heats up but growing weakness in the labor market, drops in the stock market, and general ongoing economic uncertainty are likely going to lead to a slower-than-expected spring housing market,” she adds.
Realtor.com housing data for March showed continued reluctance from homebuyers. Pending home sales, or the number of homes under contract, fell 5.2% in major metro areas last month compared to a year ago.
Still, inventory is rising, with the total supply of homes up 29% from last year. Sellers are turning to price cuts at a historic pace, with 17.5% of listings now price reduced, the highest share for a March since at least 2016.
Given the economic uncertainty generated by tariffs, the strong March employment gains are unlikely to generate the activity in the housing market that they otherwise might have.
“Unfortunately, this data does not reflect reactions to the tariffs announced this week that have unsettled markets and have businesses scrambling to figure out how to adjust,” says Hale. “This means today’s reading is likely one of those cases where past performance is not indicative of future results.”