The Jobs Miss

National Review Online

Monday, March 09, 2026

 

Investment gurus generally say that it is a mistake to put too much stress on one month’s numbers — not that that stopped stock markets’ taking another hit on the release of the latest job numbers. According to the Bureau of Labor Statistics, these showed a drop of 92,000, well below expectations (an increase of 50,000) and last month’s surprisingly strong increase of 162,000.

 

The shortfall had little effect on the unemployment rate, which has been moving up, but at 4.4 percent, it is not yet a cause for serious concern. Most troubling, perhaps, were the continuing job losses within the information sector, which have been running at around 5,000 a month for a year. Could they be evidence that AI is beginning to take a toll?

 

There are other signs that Friday’s numbers are part of a broader trend extending beyond IT or the shrinking federal government. Average monthly job gains in 2025 were the lowest in any non-recession year for two decades. That said, the picture brightens a little when looking at the prior week’s number for initial jobless claims, an unthreatening 215,000.

 

Some of the weakness in the labor market may reflect the lingering effects of a post-pandemic shakeout and the fact that the official unemployment rate had sunk so low that there was only one direction it could go. But any account of the softness must include the blows inflicted indirectly and directly upon business by “liberation day” and its chaotic aftermath. Tariffs were always going to hit company profits, the end customer, or both. Bad as those effects were always likely to have been on job creation, they will have been made worse by continuing uncertainty over where tariff rates — buffeted by negotiations, renegotiations, retaliation, legal uncertainty, and their use as a political weapon — would end up. We still do not know. That is not an incentive to invest, spend, or hire. Consumer confidence has been declining, and U.S. business sentiment (as measured by the OECD) has been depressed, although the latter had shown some recovery in the last couple of months, a period before war intervened.

 

Given the recent controversy over interest rates, an obvious question is what the Fed should do now. The general assumption of late has been that there would be no more rate cuts until the fall. However, until as recently as last week, disappointing employment numbers would have increased pressure for an earlier rate cut, however mistakenly. Inflation is still comfortably above the Fed’s so-called target rate (2 percent), and the consensus forecast for real GDP growth has been respectable, a possibly too cautious 2.2 percent (about the same as 2025).

 

The renewed fighting in the Middle East and, above all, the inflationary threat posed by higher oil and gas prices has strengthened the case for the Fed to keep rates where they are, despite the evidence of a weaker labor market. Last week, yields on ten-year treasuries rose on the news from Iran, reflecting, at least in part, increased inflation fears, although they remain well off 2026 highs. Mortgage rates may rise, and consumers are already seeing higher prices at the gas pump. When it comes to energy costs, however, Americans will fare much better than their European counterparts, who may (again) be headed for serious trouble. This will be bad news for the U.S. companies that sell to them, just one example of many of how a war can both depress economic activity and increase prices.

 

Much, obviously, will depend on how long this conflict will last, and that’s not something to which we have an answer. For now, however, we see no convincing reason for the Fed to cut rates. We continue to believe that doing so prematurely would send a disastrous message to the markets, not something we can afford given the state of our national balance sheet. There is also something to be said for keeping interest rates at a level that leaves enough room for dramatic rate cuts in the event that a financial crisis — never an impossibility at a time such as this — gives rise to a need for them. Of course, there could be a time when the economy shows enough signs of a slowdown to make a rate cut the right response, but that time is not now.

 

The best ways to help the economy remain the pursuit of energy abundance, the securing of supply lines, deregulation, and, of course, far lower and infinitely more predictable tariffs.