Market Insider

Jobs seen strong but March storms could be factor

Workers assemble washing machines at the Whirlpool manufacturing facility in Clyde, Ohio.
Luke Sharrett | Bloomberg | Getty Images

Economists expect to see 180,000 new jobs for March, a strong report with strength in manufacturing and construction but some impact from bad weather.

JPMorgan economists expect 140,000 new payrolls, and UBS predicts 155,000. Goldman Sachs economists expect 170,000, and say their forecast could have been 30,000 to 60,000 higher were it not for the winter storms in March.

Goldman economists said just as the bad weather on the East Coast and Midwest may have taken away jobs from the March report, balmy weather in February may have contributed 30,000 to 50,000 jobs in February's report.

"I actually think it's going to be over 200,000," said Mark Zandi, chief economist at Moody's Analytics. "I think it's going to be a good number."

Sectors that have been dormant are likely to show job increases. Mining, which includes oil and gas production, should be a positive, rebounding recently after a lengthy decline.

"I think we're probably seeing the best of the growth [in manufacturing] right now. We had a really good past three months and probably have a good solid three months to go. I think by the end of the year, it will be softer," said Zandi, who added that he doesn't expect a decline, just a slowing rate of hires.

Economists are expecting the unemployment rate to remain at 4.7 percent for March, and average hourly earnings are expected to rise 0.2 percent, according to Thomson Reuters.

Manufacturing added an average 19,000 jobs between December and February.

"Manufacturing is healing. It should be healing. It's a shadow of what it was. The manufacturing sector, after being bludgeoned last year, is coming back. That's good, but it's not booming," said Diane Swonk, CEO of DS Economics. Swonk said more manufacturing jobs in the mix could also mean higher wages, and there could be an upside surprise to the 0.2 percent growth expected in average hourly earnings.

"Going from positive to negative alone is huge. You don't even need big gains. It just stopped being a drag. The steel industry is starting to come back. Mining has bottomed as well," Swonk said. She added that the increase in the U.S. rig count, which started rising with higher oil prices, has resulted in an increase in oil production activity, and that has ripple effects into steel and other sectors, like trucks.

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Of the 235,000 jobs added in February, 28,000 were in manufacturing, a sector that had lost an average 1,300 jobs a month during 2016. Some 8,000 mining jobs were added in February, bringing total hiring in the sector to 20,000 since it hit a low in October.

"The trade balance is stabilizing and we're starting to export a bit more. The global economy is on firmer ground. The value of the dollar is more stable. Manufacturing took it on the chin when China stumbled and the dollar rose," said Zandi. He noted that the trade-weighted dollar gained 15 percent between mid-2014 and mid-2015, which had repercussions on trade and corporate profits.

"The economy has stabilized, and the dollar found its footing. That's reflected in better exports, better trade balance, and that's been a big plus for manufacturing," he said.

Zandi said there was a reversal of an earlier big increase in product inventories that stalled manufacturing activity. Another positive has been the surge in auto sales last year. Economists, however, believe those sales have peaked after cresting at an annualized selling pace above 18 million vehicles in late 2016.

"They're weakening now, so as we move through the year, that's not going to be the source of growth. It's not going to be the source of new jobs, as it has been. Sales have peaked," he said.

Construction has been a strong area for hiring, with 177,000 jobs added in the past six months, according to government data. The last three months were the best period for hiring since the 2006 housing boom.

Construction and manufacturing are classified as goods-producing jobs by ADP. "That is a big turnaround. Goods-producing [industries] were losing lots of jobs a year ago. They're adding jobs. That's why the [government] jobs numbers are holding up as well. The services numbers have been doing what they're doing," said Zandi.

ADP and Moody's Analytics reported 263,000 in its private sector payrolls report Wednesday, but a number of Wall Street economists said they were retaining their much lower forecasts because of potential weather impact in the government data.

Zandi said one of the differences in the ADP data, is that it counts as employed those workers who are on the payroll but can't make it to work due to weather. The government data, however, will not count a worker who does not show up to work for a week due to weather, if they are not paid.