March Employment Preview: Mixed Signals

 

March Employment Preview: Mixed Signals

by Bill McBride on 4/06/2017 12:04:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for March. The consensus, according to Bloomberg, is for an increase of 175,000 non-farm payroll jobs in March (with a range of estimates between 125,000 to 202,000), and for the unemployment rate to be unchanged at 4.7%.

The BLS reported 235,000 jobs added in February.

Here is a summary of recent data:

• The ADP employment report showed an increase of 263,000 private sector payroll jobs in March. This was well above expectations of 170,000 private sector payroll jobs added. The ADP report hasn’t been very useful in predicting the BLS report for any one month, but in general,this suggests employment growth ABOVE expectations.

• The ISM manufacturing employment index increased in March to 58.9%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll increased about 30,000 in March. The ADP report indicated 30,000 manufacturing jobs added in March.

The ISM non-manufacturing employment index decreased in March to 51.6%. A historical correlation between the ISM non-manufacturing employment index and the BLS employment report for non-manufacturing, suggests that private sector BLS non-manufacturing payroll jobs increased about 115,000 in March.

Combined, the ISM indexes suggests employment gains of about 145,000.  This suggests employment growth BELOW expectations.

Initial weekly unemployment claims averaged 250,000 in March, down from 234,000 in February. For the BLS reference week (includes the 12th of the month), initial claims were at 258,000, up from 244,000 during the reference week in February.

The increase during the reference suggests more layoffs during the reference week in March than in February. This suggests a somewhat weaker employment report in March than in February.

• The final March University of Michigan consumer sentiment index increased slightly to 96.9 from the February reading of 96.3. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• Weather: There was probably some payback from the warmer than normal weather in February. According to research economist Francois Gourio at the Chicago Fed: “Our models predict a strong negative weather effect for March NFP – around 100K jobs less than with normal weather”. This suggests a weaker than expected report.

• Conclusion: None of the indicators alone is very good at predicting the initial BLS employment report.  The ADP report suggests another strong report, however the ISM surveys suggest weaker job growth. Weekly unemployment claims suggest weaker job growth, and the weather impact appears to be negative.  I’ll break with my recent “over” picks, and take the “under” for March.

Published at Thu, 06 Apr 2017 16:04:00 +0000

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