Job gains expected again in March. Here are all the things to look for in Friday’s report

Job gains expected again in March. Here are all the things to look for in Friday’s report

A person works on a Bowlus RV at Bowlus’s factory in Oxnard, California, U.S., February 23, 2024. Each Bowlus RV is assembled by hand with aircraft-grade rivets and is hand polished. 

Timothy Aeppel | Reuters

The March nonfarm payrolls count likely will indicate hiring continuing at a solid pace, though some weakening foundations of the labor market could take greater focus when the Labor Department releases its key report Friday morning.

Job growth is expected to come in at 200,000 for the period, according to the Dow Jones consensus forecast. If that’s correct, it will mark a slowdown from February’s initially reported 275,000, but still a strong pace by historical terms.

Yet a funny thing has been happening with the jobs reports recently: Initially strong numbers have tended to be lowered in subsequent estimates, raising questions about whether the jobs situation is as positive as it looks.

That will be just one of several key areas in focus when the report is released at 8:30 a.m. ET.

Strong, but how strong?

The trend “makes me wonder about the credibility of the first number,” said Dan North, senior economist at Allianz Trade Americas. “So I’ll be looking for the revisions from the prior month to see if they’re going to be knocked down, and most likely they will be. That’s why if you get a big number, take it with a grain of salt.”

There is some anticipation on Wall Street of an upside surprise: Goldman Sachs raised its initial forecast to 240,000, an increase of 25,000, following strong private payroll data from ADP showing a gain of 184,000 on the month, and other indicators.

Drivers of growth

Inflation signals

Federal Reserve officials will watch all those factors for signs of inflation pressures. Stocks have been under pressure this week as investors worry about the direction of monetary policy.

Average hourly earnings are projected to have increased 0.3% in March, which would be a jump from 0.1% in February, though the estimate for the annual gain is 4.1%, or 0.2 percentage point less.

If the consensus calls are correct, it’s unlikely to move the needle much for the Fed, which is expected to begin cutting interest rates gradually starting in June, according to futures market pricing tracked by the CME Group.

“Unless there is a wildly positive or outright tragic employment report, they’re going to stay on course,” North said. “They’ve been really clear recently pushing back on the market saying we’re in no big hurry, inflation is not down to 2%.”

For his part, however, North noted that he expects the Fed to wait until July before it starts cutting rates — contrary to current market expectations.

Source link