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Jobs preview: Slower job growth, flat wages and a history of misses

Job growth may have slowed slightly in March and wage gains were likely flat, despite well-publicized promises of pay hikes from major employers like Wal-Mart and McDonald's.

Economists expect to see the U.S. economy created 245,000 nonfarm payrolls when the government's employment report is released Friday at 8:30 a.m. ET. The unemployment rate is expected to remain steady at 5.5 percent, and average hourly wages are expected to increase 0.2 percent, on par with recent trends.

The jobs report hits markets Friday, when only bonds and futures markets are open in the U.S., with the stock market closed for the Good Friday holiday.

March's history not encouraging

A trader works on the floor of the New York Stock Exchange.
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A trader works on the floor of the New York Stock Exchange.

"I draw 250,000 as the dividing line. If we can stay above that we can keep this party going. If there's evidence jobs are weakening that starts to confirm some of the lackluster reports we're seeing," said Jack Ablin, chief investment officer of BMO Capital Markets.

Market speculation weighs towards the jobs report coming in below expectations, particularly after the ADP private sector payrolls report Wednesday showed just 189,000 jobs in March, when 225,000 were expected.

While the consensus expectation for Friday's government report did not fall as a result, the markets reacted negatively to the ADP data, since it was the first sign that a weaker first quarter may be hitting payroll data.

March also seems jinxed when it comes to jobs reports. Ian Lyngen, senior Treasury strategist at CRT Capital, points out that the nonfarm payrolls came up short of expectations in six of the last seven years, missing by an average 42,000. In 18 years, the initial March reports missed 67 percent of the time by 81,000 jobs, he noted.

Read More Markets should brace for weak jobs report: Expert

"A lot of the weakness in the current number has a lot to do with the winter. There's clearly a slowdown in manufacturing and durable goods orders that had to do with the appreciation of the dollar," said Luke Tilley, chief economist at Wilmington Trust. He expects to see 230,000 nonfarm payrolls for March, but also anticipates the fundamental strength in hiring to continue.

Economists also say the pace of job growth may now be heading to a new lower 250,000 monthly pace. The last three months averaged gains of 288,000—much higher than economists had expected.

"I still think that wages, as of tomorrow, will continue to be fairly flat but we've taken the position that we believe wages will pick up in the second half of the year," Tilley said.

Wage gains remain elusive and that is something the Federal Reserve is watching as a potential inflationary sign as it moves to raise interest rates. Diane Swonk, chief economist at Mesirow Financial, said wage gains should start kicking in by summer as companies act on their promises, and more companies jump on board with wage hikes.

Read More McDonald's to raise pay as franchises may feel new pressure

Wal-Mart, the largest U.S. employer, said it would raise minimum hourly wages to $9 for its 500,000 workers this month.

"It's really being driven by the fact that minimum wages are rising already, and the retailers are getting out ahead of it and promoting that. Also, there is a [public relations] aspect of it that's important to them," said Swonk.

Barclays chief U.S. economist Michael Gapen agrees the announced wage hikes will not necessarily show up in the data but the trend should show up in several months. He expects nonfarm payrolls of 250,000 and average hourly wage gains of just 0.1 percent.

"Given the McDonald's change is expected to affect 90,000 workers in a job market of over 140 million, you can't point to a cumulative effect. The trajectory is going in the right direction," he said.

"You've heard from Wal-Mart, You've heard from Target. You've heard from McDonald's. It would leave you to believe that some of these retail chains are having a difficult time either attracting or retaining workers," said Gapen. "If that's the case, you could see some nascent signs of labor market tightening. We don't really see it in the data yet."

Read More McDonald's outlook is negative, but wage hike helps: Analyst

Anecdotally, however, salaries appear to be rising in the professional sector as well.

Justin Hirsch, president of Jobplex, a unit of DHR International, says he's never been busier in his 4-1/2 years at the management recruitment firm. His specialty is mid-level emerging leaders, and he's seeing a pickup in pay and a tighter market for candidates.

"They're tight in human resources, in IT, finance…and sales. Companies are looking for better sales executives with proven track records," he said.

Salary hikes for existing employees appear to be running at three to five percent, he said. While for new hires, they average five to seven percent. In some cases, where the competition is stiff, candidates are able to get 10 percent.

Read MoreThe biggest beneficiary of Wal-Mart's wage hike

"We're seeing a trend where corporations realize they have to invest more," he said. Hirsch's clients include about 50 of the Fortune 1000 companies.

Gapen said some of the slowdown in payroll gains has to do with hiring no longer getting the same kick out of lower energy prices.

Economists expect those low energy prices to continue to take a toll on workers in energy related fields and in other areas that serve the energy sector, like steel. Some workers may also have been idled due to goods tied up by West Coast port disruptions.

"The hiring will continue to be broad-based, as it has been for a little while," said Tilley, noting manufacturing is an exception. "Certainly the energy sector is feeling the impact of lower energy prices…but we don't really think that's enough to outweigh the organic growth in some of the other sectors of the economy."

He expects hiring to continue to be strong in professional and business services, leisure and hospitality and education and health care.