Author：Currency Explorer

Nick Timiraos, a Wall Street Journal reporter known as the "Federal Reserve mouthpiece," pointed out that the March jobs report once again reminded people why so many economists have been reluctant to be bearish on the U.S. labor market: because even after four years of a series of shocks, it has managed to hold its ground.The question now is how long this resilience can last.

Over the past few years, the US job market has weathered the most severe interest rate hikes in decades, a regional banking crisis, and tariff shocks. Each time, it teetered on the brink of collapse but never did. Now, the latest major upheaval in energy prices and supply chains caused by the Iran war will once again test the limits of this resilience.

In March of this year, U.S. employers added 178,000 jobs, reversing the sharp decline of 133,000 jobs in February (a larger drop than previously expected).The unemployment rate also erased its February gains, falling slightly to 4.3%. However, some details were less encouraging. Wage growth for ordinary employees slowed to its weakest year-on-year pace since the pandemic-driven reopening five years ago.

Timiraos points out that averaging these two volatile months reveals the underlying trends more clearly: this tableThe average number of new jobs created each month was only 22,500.While this rate of increase would have been alarming two years ago, the labor market's current stability is largely due to a sharp decline in immigration and an increase in retirees. This means economists now believe that fewer net job creations are needed to maintain the basic strength of the job market compared to the past.

By 2026, economists had hoped that the slowdown in the job market would have bottomed out.The impressive core data in March may be a glimpse of this hope.But after the blockade of the Strait of Hormuz completely disrupted the global energy supply chain, labor economist Guy Berger bluntly stated:Nobody is expecting the economy to accelerate again right now..

The labor market has been adapting to significant changes in immigration policy, directly resulting in a shrinking potential workforce. Businesses are slow to hire but extremely hesitant to lay off workers. It's a job market that aligns with full employment, but its extremely low growth and lack of dynamism leave it with very little room to maneuver in the face of shocks.

Federal Reserve officials have been racking their brains trying to figure out what it means if the economy needs far fewer jobs to keep the unemployment rate stable. "It's not easy to convince people that an economy with zero job growth is equivalent to full employment," San Francisco Fed President Daly wrote in a blog post last Friday. She stated that...The restricted influx of new workers means the economy's "Speed limit"The risk has been reduced, but the risk of misjudgment—whether setting interest rates too low or too high—is constantly increasing."

Timiraos stated that the high level of uncertainty brought about by the war has subtly altered the rhetoric of Federal Reserve officials regarding the path of interest rates. Before the conflict erupted, many policymakers were still hoping to resume rate cuts this year. Now,A growing number of people are suggesting that the Federal Reserve may remain on hold indefinitely.

The most optimistic scenario is that the war and its resulting supply chain upheaval will not last long, thus containing the disruption to hiring. The most pessimistic scenario, however, is that a protracted conflict could cause price shockwaves to spread rapidly to fertilizers, industrial chemicals, and semiconductor manufacturing. Higher costs for businesses and consumers could significantly squeeze consumer spending that supports new hiring.

Unlike the energy shock triggered by the Russia-Ukraine conflict in 2022, consumers today have already depleted most of their savings, and wage growth is also slowing down. This means that households have less and less room to absorb high prices without tightening their belts. Once they do cut back on spending, businesses that rely on consumption will have to reduce employee hours or even lay off workers.

Citigroup's chief economist, Nathan Sheets, points out that because the bottom 60% of earners spend most of their budget on necessities, they will continue to spend money as long as they keep their jobs. He frankly admits, "What could really break them is a sharp cooling of the labor market."

now,Various costs have begun to accumulate.Fiscal stimulus measures, which were intended to support economic growth and bolster hiring this spring, are now racing against soaring oil prices. Economists at the Federal Reserve Bank of St. Louis estimate that if gasoline prices remain high, the fuel price increases over the past month mean consumers will have to pay significantly more each quarter, equivalent to 10% to 50% of the benefits of Trump's tax cuts last year.

Every dollar added to a car's gas tank means that dollar doesn't flow into the pockets of restaurants, retailers, and various service industries—industries that account for half of all employment in the United States. Meanwhile, rising bond yields have pushed mortgage rates back up from 6% to around 6.5%, further dimming hopes of boosting construction jobs by stimulating the housing market.

Timiraos says there's reason to believe the labor market can weather this blow as it has in previous crises. Sheets argues that years of experience have made companies leaner and more adaptable, like an athlete in peak training condition, rather than someone exhausted and clinging to life.

The US economy is no longer as dependent on oil as it used to be.However, Skanda Amarnath, executive director of the economic policy think tank Employ America, points out that this does not mean the coming storm will be painless, nor does it mean that strong resilience equates to absolute strength.Amarnath described the labor market facing this shock as "lying flat."In other words, it may appear listless for a period of time, but it will never fall apart completely.

Berger remarked, "My experiences in 2022, 2023, 2024, and 2025 have made me realize that it is not impossible for things to continue to deteriorate at an extremely slow pace."

Timiraos concluded that the Federal Reserve, tasked with both maintaining a healthy labor market and controlling inflation, is facing a dilemma unlike any it has encountered in the past when facing shocks.The Federal Reserve has now spent five years trying to convince the public that inflation above target is only temporary, and each new shock makes this argument increasingly difficult to justify.How this drama will ultimately end depends largely on how long the war will continue..

PGIM's chief global economist, Daleep Singh, said a ceasefire agreement that would protect all parties could bring oil prices back to the $80-$100 per barrel range. However, he warned that if the conflict escalates, the Federal Reserve's hands will be completely tied, forcing it to grapple with supply chain disruptions that are dragging down economic growth for a long time after the fighting subsides. This would make it even more difficult for the Fed to cushion any potential economic slowdown by cutting interest rates.