Whatever's next for the job market, war is having an impact

Economic news moves fast these days. A little more than a week ago, we got the March jobs report — which, in the midst of all the other economic turmoil of the Iran war and soaring oil-and-gas prices — was surprisingly good. Employers added 178,000 jobs, and unemployment fell to 4.3%.

Then on Friday, we got the consumer price index for March. It spiked sharply higher, with prices up 3.3% year-over-year.

The war is impacting sectors of the economy differently. The sharp rise in oil and gas prices has been a boon for the energy sector. The U.S. now pumps enough of the stuff to export a lot. And with prices so high, there’s an incentive to increase production, said Tom Kloza, chief energy advisor at Gulf Oil.

“I think we’ll see the labor force ramp up a little bit. When you’re drilling for oil in the Permian Basin, it’s very labor-intensive,” he said.

The workforce has actually been declining for more than a decade, but Kloza said there’s more promise now, with projects ready to go in the Permian Basin and Gulf of Mexico. “They have break-even numbers for these projects — probably a third of what the price of crude is these days — so they can’t wait to ramp those up.”

Defense industries also stand to benefit. President Donald Trump’s fiscal year 2027 budget — if it passes — includes a more than 40% increase in defense spending.

Jerry McGinn, director of the Center for the Industrial Base at the Center for Strategic and International Studies, expects increased hiring by defense contractors, which already employ hundreds of thousands of workers.

“A lot of the funding is buying existing munitions, new munitions, new capabilities, as well. So there’s a lot of industrial base impact with this potential increase in spending,” he noted.

Overall, though, the impacts of the war are mostly negative for economic growth and employment. Michael Gritton is seeing this in Louisville, where he runs the regional workforce development agency KentuckianaWorks.

“UPS is clearly being affected by the increase in fuel costs,” he said. “We have lots of trucking and logistics and barge traffic and all that kind of stuff — all of those things being affected negatively,” and freezing out any near-term job growth.

Now, keep in mind — through mid-March, we saw a strong rebound in job growth, according to the BLS. But we’ll see “a different picture in April,” cautioned Boston College economist Brian Bethune. “Businesses will throttle back on their hiring.”

Bethune pointed out that with the surge in prices in March, inflation is now canceling out all the wage gains workers are seeing. “Wallets are being squeezed, that, I think, will lead to containment of spending,” he said. “And I think businesses will go back to how they were successful in 2025.”

And 2025 saw a lot of hunkering down — maybe not laying workers off but not hiring, either.