U.S. Hiring Rate Hits 3.5% in March, Fastest in Two Years, but Iran War Threatens Recovery

Key facts

• Hiring rate jumped to 3.5% in March 2026, up from 3.1% in February.
• Three-month average hiring rate is essentially flat from the start of the year, suggesting a bottom after four years of declines.
• Heather Long, chief economist at Navy Federal Credit Union, called the data 'encouraging signs' but cited the Iran war as a major risk.
• Nicole Bachaud, labor economist at ZipRecruiter, attributed the pickup to businesses feeling more certainty about tariffs and interest rates.
• Hiring expanded beyond healthcare for the first time in a long time.
• The labor market had been in a 'low hire, low fire' mode for over a year, with low rates of hiring, layoffs, and voluntary quits.
• The current recovery contrasts with the 'great resignation' era of 2021-2022 when job openings hit all-time highs.

March Data Shows Hiring Surge, but War Clouds Loom

The U.S. job market may finally be emerging from a deep freeze. According to Bureau of Labor Statistics data released Tuesday, the hiring rate among employers climbed to 3.5% in March 2026—the fastest pace in two years, up from 3.1% in February. Yet the nascent recovery faces a grave threat. Economists warn that the ongoing war in Iran could halt the progress, potentially plunging the labor market back into stagnation. 'The big concern is the war in Iran could halt that much needed progress in the labor market,' wrote Heather Long, chief economist at Navy Federal Credit Union, in an email.

Encouraging Signs After a Prolonged Freeze

For more than a year, the labor market had been stuck in a 'low hire, low fire' pattern, with minimal hiring, few layoffs, and workers reluctant to switch jobs. That dynamic offered scant opportunities for job seekers and new entrants, a stark reversal from the 'great resignation' of 2021-2022, when openings hit record highs and workers changed jobs in droves. Now, there are signs of a thaw. 'Is the hiring recession finally over? There are encouraging signs,' Long wrote. The March data suggests that businesses are beginning to hire again, likely because of greater certainty around economic policies such as tariffs and interest rates, said Nicole Bachaud, a labor economist at ZipRecruiter.

Hiring Broadens Beyond Healthcare Sector

For the first time in a long while, hiring picked up in industries other than healthcare, Long noted. This broadening of hiring activity is a positive signal that the recovery may be more than just a sector-specific rebound. However, the three-month average hiring rate remains 'essentially flat from where it entered the year—suggesting it has potentially found a bottom after four years of declines,' a senior U.S. economist at Oxford Economics, in a research note Tuesday.

Economists Divided on Sustainability Amid Geopolitical Risk

While the March data offers hope, economists caution that one month does not make a trend. The Iran war introduces significant uncertainty that could derail the recovery. Long emphasized that the conflict poses a major risk to the labor market's momentum. Bachaud pointed to increased business confidence as a driver of the recent pickup, but that confidence could evaporate if the war escalates or disrupts supply chains and energy markets. The labor market's trajectory hinges on how the geopolitical situation unfolds.

What Comes Next: Fragile Recovery Hinges on Peace

The coming months will be critical. If the Iran war de-escalates or ends quickly, the hiring momentum could accelerate, potentially leading to a sustained recovery. Conversely, a protracted conflict could freeze hiring once again, as businesses delay decisions amid uncertainty. Economists will be watching April and May data closely for signs that the March uptick was not a one-off. The labor market's fate is now intertwined with geopolitical developments beyond the control of domestic policymakers.

The bottom line

• The U.S. hiring rate hit 3.5% in March, the highest in two years, signaling a potential end to the hiring recession.
• The recovery is fragile: the Iran war could reverse the gains, according to economists.
• Hiring broadened beyond healthcare for the first time in months, a positive sign for the labor market.
• The three-month average hiring rate is flat, suggesting the market may have bottomed after four years of decline.
• Business confidence, boosted by clarity on tariffs and interest rates, is driving the pickup.
• The labor market's future depends heavily on the duration and impact of the Iran conflict.