“March’s jobs report shows the economy still has a pulse—but it’s not racing,” Gina Bolvin, president of Bolvin Wealth Management Group, wrote in a note.

Don’t get too comfortable, said Diane Swonk, chief economist at KPMG.

“The unemployment rate dropped, but for the wrong reasons: a loss in labor force participation,” Swonk told Fortune. The declines were concentrated among prime working-age men (twenties to thirties); young women between ages 20 and 24; and men over 55. In other words, the unemployment rate fell not because people found work, but because they became discouraged and stopped looking. 

The broader U-6 measure of unemployment, which captures exactly those discouraged workers plus those stuck in part-time jobs when they want full-time work, actually edged up to 8%, even as the headline rate improved. Swonk said government workers forced to take part-time jobs during the government shutdown last month likely contributed to that increase.

That uptick aligns with the latest JOLTS report from earlier this week, which showed hiring has fallen to its lowest rate since April 2020, a level previously seen only during the Great Recession.

The jobs report marks a sharp rebound from February, which was revised to show a loss of 133,000 jobs, a number that shocked economists for how much it missed expectations. But as the saying goes, one data report is just a signal; two is a pattern; three months, really, is what tells you the trend. The three-month moving average, Swonk said, sits at just 68,000 jobs, and over the past year the economy has added only 156,000 positions total, the weakest stretch since the pandemic.

“We entered this year with a tailwind,” Swonk said. “And now that’s being wiped out by the headwinds.”

Those headwinds are arriving fast. The March survey was conducted before the energy shock from the U.S.-Iran war began rippling through the economy. Oil prices have spiked; shipping costs have surged; and several Asian countries that absorbed manufacturing from China—Vietnam, Cambodia, the Philippines—are already rationing fuel, Swonk said.

This is not the kind of oil shock economists typically look through. Those tend to hit both sides of the equation at once, slowing growth while raising prices, and eventually wash out. This one “is more COVID-esque,” Swonk said, pointing to supply-chain disruptions that extend far beyond crude—from diesel and jet fuel to helium, a key input in semiconductor production. Swonk said CFOs she has spoken with are watching shipping costs soar after the transportation sector had just begun recovering from a recession. 

“They’re seeing things just spike,” she said.

The health care engine keeps running 

To be sure, March showed the broad-based growth economists had been waiting for. For the past year, health care has been essentially the only industry consistently adding jobs. But this report showed gains in leisure and hospitality (44,000 jobs), residential construction, and manufacturing (15,000). Still, health care remained the dominant engine, contributing nearly 90,000 jobs—roughly half the total—with about 27,000 of those coming from striking nurses in California and Hawaii returning to work after negotiating a new contract to ensure safe staffing. 

Meanwhile, the frozen hiring market appears to be dragging on wages. Average hourly earnings rose just 0.2% month over month and 3.5% year over year, the slowest annual pace since 2021. Swonk expects inflation to cross 4% this summer and potentially approach 5%, meaning workers could soon be losing their ground in real terms even while holding on to their jobs.

And the pain is falling hardest on the youngest workers. The unemployment rate for new college graduates is running near 5.6%, almost double its 2019 level. Jeffrey Roach, chief economist at LPL Financial, noted employment among 20- to 24-year-olds is declining even as older workers gain their own ground—a shift he attributed in part to artificial intelligence reshaping entry-level roles. 

“This year will most likely be a year of shifting labor dynamics as artificial intelligence upends the job market, especially for low-skilled roles,” Roach wrote in a note.

The report eases one of the Fed’s trickiest dilemmas from the past year, when weak job growth put pressure on officials to cut rates even as inflation refused to come down. A stronger labor market takes that tension off the table. 

“It means the Fed could focus on inflation,” Swonk said. “And inflation is a problem.”