Four reasons why healthcare work is holding up the US labor market (Part one)

The March 2026 Non-Farm Payroll report, released on April 3 by the Bureau of Labor Statistics, delivered a headline that sharply exceeded expectations. The U.S. economy added 178,000 jobs, far above the consensus estimate of 59,000 from The Wall Street Journal, while the unemployment rate edged down to 4.3%.

Source: Bureau of Labor Statistics

Beneath that strong headline, the composition of job growth tells investors that healthcare was the dominant driver. The sector added 76,000 jobs in March alone, accounting for a disproportionate share of total gains. Employment surged in ambulatory healthcare services (+54,000), largely reflecting the return of workers following physician office strikes, while hospitals added another 15,000 positions. Over the past year, healthcare employment has grown at an average pace of 29,000 jobs per month.

This concentration is not isolated to government data. The ADP employment report also showed that most of March’s private-sector job gains were anchored in healthcare, reinforcing the idea that hiring momentum is increasingly narrow.

That dynamic stands in stark contrast with the broader labor market trend. Over the past six months, the U.S. economy has added just 15,000 jobs per month on average, a sharp slowdown from 78,000 during the same period a year earlier. Job losses have occurred in five of the past twelve months, while white-collar payrolls have been contracting for over two years, an unusually prolonged downturn outside of a recession.

Against this backdrop, healthcare and social assistance have effectively acted as a stabilizing pillar for employment. Without them, the labor market would look materially weaker. And this is not a cyclical anomaly: it reflects a structural shift that has been decades in the making.

Source: The Wall Street Journal

Since the early 1980s, healthcare has been one of the most consistent sources of job creation in the U.S. economy. Employment in the sector surpassed both manufacturing and retail in the early 2000s and has continued to pull ahead, according to research from the University of Chicago. Over the same period, healthcare spending has expanded from roughly 7% of U.S. GDP in 1970 to around 18% in 2024.

This sustained expansion is driven by long-term forces that are largely insensitive to economic cycles.

Demographics: An aging population with non-cyclical demand

The aging of the U.S. population is one of the most powerful and predictable drivers of labor demand in healthcare. As the baby boomer generation moves deeper into retirement, the need for medical services rises steadily, regardless of economic conditions. Older populations require more frequent physician visits, higher rates of hospitalization, and increased reliance on long-term and home-based care. Unlike discretionary consumption, this demand does not contract during economic slowdowns.

According to the U.S. Census Bureau, the nation is undergoing a historic demographic shift. The centenarian population surged by 50% between 2010 and 2020, now exceeding 80,000 people. This trend is mirrored in the broader population, as by mid-2024, the median age hit a record high of 39.1 years. Future projections from the Population Reference Bureau suggest this aging trend will only accelerate. The number of Americans aged 65 and older is expected to grow from 58 million in 2022 to 82 million by 2050—a 42% increase that will see this age group represent nearly a quarter (23%) of the total population.

This demographic trend creates a structurally rising baseline for healthcare demand — and therefore employment — that is largely immune to business cycle fluctuations.

The expansion of chronic illness: From episodic to continuous care

A second structural driver is the growing prevalence of chronic diseases across the U.S. population. Conditions such as heart disease, cancer, and diabetes (all classified under Chronic Disease) require ongoing management rather than one-time treatment. This fundamentally changes the nature of healthcare demand, shifting it from episodic intervention to continuous care.

Chronic diseases are now the leading cause of death and disability in the United States and account for the vast majority of healthcare utilization. They are also the primary driver behind national health expenditures, which reached approximately $5.3 trillion in 2024, $15,474 per person, or about 18% of GDP. According to the Centers for Medicare & Medicaid Services, roughly 90% of total healthcare spending is directed toward individuals with chronic or mental health conditions.

From a labor market perspective, this creates a persistent floor under employment. Managing chronic illness requires a continuous workforce of physicians, nurses, technicians, and care providers. Unlike sectors tied to discretionary spending, healthcare demand is anchored in necessity.