{"id":8651,"date":"2026-03-27T18:00:45","date_gmt":"2026-03-27T18:00:45","guid":{"rendered":"https:\/\/www.rbc.com\/en\/economics\/?p=8651"},"modified":"2026-03-31T17:23:11","modified_gmt":"2026-03-31T17:23:11","slug":"stable-unemployment-masks-sector-imbalances","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/us-week-ahead\/stable-unemployment-masks-sector-imbalances\/","title":{"rendered":"Stable unemployment masks sector imbalances"},"content":{"rendered":"\n
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Next week will provide more clues about the trajectory of the US labor market \u2013 we<\/strong> expect to see payroll growth rebound to 50k with the unemployment rate holding steady at 4.4% in March.<\/strong> <\/p>\n<\/div><\/div>\n<\/div>\n<\/div>\n\n\n\n

In February, a nurses\u2019 strike in California resulted in -34k jobs subtracting from the health care sector, but it ended February 23rd<\/sup>,so those jobs will be added back payrolls in March. This means that we are likely to see an exceptionally strong gain in the health care sector this month. But outside of health care, the US labor market has not been meaningfully creating new jobs and we expect that trend to continue in March. The uncertainty added by the geopolitical events in the Middle East are likely to weigh on hiring activity in trade and transport sectors, which have already been shedding jobs for months.<\/p>\n\n\n\n

A lack of net new job creation is not problematic at this juncture \u2013 we estimate the pace of monthly breakeven job growth in 2026 is exceptionally low (likely flat to 30k) due to the slowdown in immigration as well as the record number of retirements<\/a>. This means that the US economy needs to add very few jobs for the unemployment rate to hold steady. A hire made to backfill a retiring worker does not count as a \u201cnew job\u201d in the data. Since we are witnessing a massive wave of retirements (roughly 160k per month), there is a significant amount of hiring beneath the surface that does not show up as payroll growth. Put differently, the headline print understates actual labor market tightness because backfill hiring is masked by churn.<\/p>\n\n\n\n

The current concentration of job growth in health care has become more problematic given that trade-exposed sectors have been shedding jobs for 11 of the past 12 months. Even sectors insulated from trade exposure, such as finance and information employment are hiring at a tepid pace. Structural hiring continues to mask this cyclical weakness, and the skew toward a single sector raises concerns around skills mismatches for recent graduates. If entry-level hiring is concentrated in health care, new entrants trained in other fields face will see limited opportunities to enter the labor market.<\/p>\n\n\n\n

Focusing on the near-term, we continue to expect to see trade-exposed sectors shed jobs, with a particular risk for transportation reliant sectors, as fuel prices remain elevated. Construction has been the outlier for hiring within the goods sector because the continued demand for non-residential construction (i.e., data centers) has sustained demand.<\/p>\n\n\n\n

The unemployment rate is unlikely to move in the month of March if jobless claims are any indication. Continuing claims fell slightly between the reference weeks for February and March and initial jobless claims held steady. This is consistent with our expectation that the unemployment rate will hold steady despite the relatively weak headline payroll growth.<\/a><\/p>\n\n\n\n

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Outside of payrolls, here\u2019s what we\u2019re watching next week:<\/p>\n\n\n\n