We expect the March employment report to show an increase of 60,000 jobs with risk of a modestly stronger print when the Bureau of Labor Statistics releases the data on Friday.
The March estimate will reflect a bit of catchup in hiring following February’s decline of 92,000 jobs that was affected by bad weather and a strike.
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We expect the February estimate will be revised up, leaving the total change in employment for the report closer to 80,000.
Because we think that the monthly gain to keep labor conditions stable is around 25,000 jobs, we expect that the unemployment rate should arrive at 4.4% while wages should increase by 0.4% on the month, which should translate to a 3.7% year-ago increase.
The latter will take on a bit more importance going forward. Given the oil shock that is cascading through the U.S. economy, real wages are likely to turn negative in the coming months, exacerbating the affordability crisis that Americans have been communicating to anyone willing to listen over the past year.
In March we anticipate that the jobs rebound will be in the health care and private education categories with modest gains in construction and goods-producing sectors. The government sector will continue to function as a net drag on overall hiring.
While the war in the Middle East will weigh on hiring going forward, the conflict is not likely to affect the March report in a significant manner. That will show up in the April and May estimates.
Why is that?
The impact of the war has shown up in higher gasoline prices and transportation costs, which tend to affect corporate hiring with a lag.
Once top-line inflation shows up in the consumer price index and personal consumption expenditures index for March and April (reported in April and May), that will then put at risk another month of negative payroll growth.
Energy shocks tend to be associated with higher unemployment. Firms that must adjust their balance sheets tend to face three choices—thinner margins, passing along higher costs to households, and firing workers. In most cases, they choose a varied composition of all three.
Laying off workers will not be case this month, but higher prices will surely affect the unemployment rate this spring and summer.
Lastly, it is important to remember that because of the Bureau of Labor Statistics’ new birth-death model, there will be more monthly volatility in the employment estimates.
That development serves as an important reminder that it makes more sense to place greater emphasis on the three-month moving average in payrolls and not put too much emphasis on any given single monthly report.
