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One wrinkle lurking in March's strong jobs report

March's solid jobs report showed a surprising jump in wages and hiring, but it also contained a warning that may signal slower labor growth.

Employers added a slightly better than expected 215,000 payrolls, while average hourly earnings rose 0.3 percent last month. The unemployment rate edged up to 5 percent from 4.9 percent due to more workers joining the workforce.

But a future indicator of hiring continued to lag. "Three months in a row temporary help has been very weak, just up 4,000 in March. That's a leading indicator," said John Canally, economist and market strategist at LPL Financial. He said there was a surprising decline of more than 55,000 temp workers in January and February combined. Last March,10,000 temporary workers were hired.

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Temporary help was a number watched closely as economists looked for a recovery in the post-recession job market, as it's an early sign that employers are anticipating making long-term hires.

The jobs report also comes against a backdrop of a slow-growing economy, with first quarter growth estimated at now less than 1 percent.

"Good jobs, rising wages and slow growth. That's a recipe for very weak corporate margins," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank.

The jobs report, however, showed some signs of improvement. The slow-to-grow wage component of the jobs report shows wages rising 2.3 percent year over year. That helped drive up yields on the short end of the Treasury curve. Average earnings rose by 7 cents, after a 2 cent decline in February.

Wages are closely watched as they are an early warning sign for inflation, which has been running below expectations — a reason the Fed could hold off on rate hikes.

According to RBS, market expectations of a December rate hike rose to 78 percent from 72 percent after the jobs report. Expectations for September rose to 54 percent from 46 percent.

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Analysts said despite the bond market reaction, the report does not really change the interest rate trajectory after Fed Chair Janet Yellen's dovish comments this week.

"It's a steady improvement and it's good," said John Briggs, RBS head of strategy Americas. "But it's not going to shake Yellen's new tone."

Another area that improved was the participation rate, edging to 63 percent, from 62.9 percent. That rate was about 66 percent prior to the financial crisis, and it finally started to consistently rise in the last several months.

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In March, the retail sector added 48,000 jobs, and health care gained 37,000. Manufacturing jobs continued to decline, losing 29,000, while construction was up by 37,000.

"On the surface, the numbers look pretty good. You had good jobs growth," said LaVorgna. "But we're losing a lot of manufacturing jobs, which isn't good."

The average workweek for all employees was unchanged at 34.4 hours in March but the manufacturing workweek was down by 0.1 hour to 40.6.