A worker operates a Bowlus recreational vehicle at the Bowlus factory in Oxnard, California, on February 23, 2024.
Timothy Epel | Reuters
March’s nonfarm payrolls data may show that hiring continues at a solid pace, although some of the labor market’s softer underpinnings may receive more attention when the Labor Department releases its key report Friday morning.
Job growth during this period is expected to reach 200,000, according to the Dow Jones consensus forecast. If that’s correct, it would mark a slowdown from the 275,000 initially reported in February, but still a strong pace from a historical perspective.
However, a funny thing has happened with recent jobs reports: The initially strong numbers tend to be lowered in subsequent estimates, raising questions about whether the employment picture is as positive as it seems.
This will be just one of several areas of focus when the report is released at 8:30 a.m. ET.
Strong, but to what extent?
The 198,000 new jobs reported in February exceeded Wall Street expectations and was shocking. However, also attracting attention were revisions to the previous two months, with numbers falling by 43,000 to 290,000 in December and 124,000 to 229,000 in January.
Throughout 2023, Reduced by 520,000 after modification The preliminary estimates – which included three readings in total – buck the historical trend of final numbers generally being higher than the first readings.
The trend “makes me question the credibility of that first number,” said Denos, senior economist at Allianz Trading Americas. “So I’m going to be looking for last month’s revisions to see if they’re going to be overturned, and they probably will be. That’s why if you get a big number, take it with a grain of salt.”
Wall Street had a surprise on the upside: Goldman Sachs raised its original forecast to 240,000, an increase of 25,000, after strong private payrolls data from ADP showed a gain of 184,000 for the month, and other indicators also increased.
growth momentum
Beyond the numbers, the composition is also important, i.e. where the growth is coming from and whether there are any cracks in the employment armor. The job market’s resilience has baffled many economists, who spent the past two years looking for a jobs-led recession that never actually happened.
“Businesses are seeing strong demand. They’ve increased their productivity tremendously, so they’re hiring for different types of jobs,” said Luke Tilley, chief economist at Wilmington Trust. “That allows them to cope with high interest rates environment.”
Still, there are some areas of concern.
The number of household jobs used to calculate the unemployment rate, which counts individual workers rather than total employment, has fallen by nearly 1 million since November. The survey is more volatile and uses a much smaller sample than the establishment count that generates overall job growth totals. But there is no obvious reason for the weakness, although some economists speculate it may be related to a surge in illegal immigration over the past few years.
also, Full-time employment fell slightly The number of part-time workers has increased by more than 900,000 over the past year.There are also sharp Fewer temporary workersa classic sign of an economic slowdown.
inflation signal
Fed officials will be watching all of these factors closely for signs of inflationary pressures. Stocks have come under pressure this week as investors worry about the direction of monetary policy.
Average hourly earnings are expected to grow 0.3% in March, a jump from February’s 0.1%, but annual growth is expected to be 4.1%, or 0.2 percentage points lower.
If the consensus call is correct, it is unlikely to have much impact on the Fed, which is expected to Gradually cut interest rates starting in June futures market pricing Tracked by CME Group.
“Unless there’s a very positive or downright miserable jobs report, they’re going to keep going,” North said. “They’ve been very clear in pushing back on the market lately, saying we’re not in a hurry, inflation isn’t going to get down to 2%.”
North said he expects the Fed to wait until July before cutting interest rates – contrary to current market expectations.
