March Jobs Report Will Be Full of Excuses
The U.S. is expected to have added fewer jobs in March than in February, and there are plenty of excuses, including government belt-tightening, an early Easter, and unusually cold weather.
The consensus estimate is for 200,000 nonfarm payrolls, according to Reuters, but the whisper number is about 50,000 lower, and some economists Thursday were still lowering their forecasts due to weaker jobs-related data in the days ahead of Friday's release. The 8:30 a.m. employment report is widely expected to show the unemployment rate stayed unchanged at 7 .7 percent.
Stocks finished Thursday higher, boosted by a big asset buying program announced by the Bank of Japan. But buyers rushed into Treasurys, pushing yields near the lows of the year, as traders bet the payrolls number would fall short of expectations.
"I would say what we're seeing is a fair amount of short-covering of positions [in Treasurys] that were in place for a strong or stronger nonfarm payroll print, and those expectations have been pulled back, quite frankly," said Ian Lyngen, senior Treasury trader at CRT Capital. "I think the combination of the ADP number and the ISM nonmanufacturing employment number, and this bounce in initial jobless claims has people looking for a nonfarm payroll printing closer to 155,000 than 200,000."
The ADP report Wednesday showed just 158,000 private sector jobs added in March, and the sentiment worsened when the ISM nonmanufacturing employment number showed a decline in growth in March. The weekly jobless claims Thursday, while not related to the March jobs number, was a dampener when it showed a jump in claims to 385,000, the highest level since November. Some of that increase was blamed on seasonality and the Easter holiday.
Deutsche Bank chief U.S. economist Joseph LaVorgna trimmed his forecast for March to 160,000 jobs after the ADP report, but he expects the job growth rate to return to the 200,000 level in April. It was 236,000 in February.
"The tone of some of the key data in March certainly got worse. I think it was sequester and the weather," he said. "I think things that were holding back the economy last month were temporary in nature. It was the coldest March since 1996." LaVorgna said the cold weather probably crimped hiring in construction.
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Goldman Sachs economist Jan Hatzius expects the report to show 175,000 jobs were created in March, and the unemployment rate at 7.7 percent. He also saw special factors affecting the report, but he expects some of those factors to keep hiring at about the same level for the near future. He expects economic growth to limp at a 2 percent rate for the second and third quarter before improving at the end of the year, along with employment.
Hatzius said the sequester, or automatic federal spending cuts, probably resulted in a 10,000 hit to the March jobs number, but that impact will increase to 20,000 to 30,000 in subsequent months. He said that is the result of a freeze in government hiring, and possible cuts at private sector defense contractors.
He also expects to see construction impacted by the weather. But there should be job increases in "some of the areas that always show gains, namely health care, a little bit in things like hotels and restaurants and a little bit in clearly one that should show gains – manufacturing," he said.
But some economists were still expecting to see job creation of more than 200,000. Diane Swonk, chief economist at Mesirow Financial said she expects to see 210,000 jobs created in March, but 220,000 when government layoffs are not counted.
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"I'm looking for a pretty good number even though ADP was a bit lighter, and the composition now depending heavily on the service sector. I'm looking for more manufacturing jobs, a little more in construction even though it didn't show up in the ADP report. There's a lot of construction activity going on out there," she said. "Interesting, that the truck sales we saw yesterday were linked to the housing market."
Tom Gimbel, CEO of LaSalle Network, a Chicago staffing and recruiting firm, said what he sees in his business is encouraging for the job market, even though he sees March as being soft in part due to the Easter and Passover holidays. "The numbers for March were okay, but my April numbers look really good," he said .
Gimbel said companies held back hiring in the second half of last year ahead of the election and fiscal cliff, but they are active again and he expects a lot of activity in the summer months. "Another thing we're seeing in the Midwest is that marketing has been very hot. It's a really good sign for the economy when marketing and human resources are doing well, and we're seeing a lot of activity in those two areas," he said. "They were the first two areas to be hit."
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Gimbel said he expects to add 30 employees to his own 100-person firm. "I think what I see looking at my clients is that there's no correlation between companies making more money, the stock market going up and increased hiring. People are looking at getting 2003, 2004, 2005 (hiring) levels, and that's not going to happen. Companies are showing they don't need surplus amounts of people in order to make money," he said.
"Where the jobs are going to come from, I don't think they are in the corporate bellwethers," he said. He expects to see hiring by smaller companies. "They can be business to consumer, but more business to business and they have currently 50 to 200 employees, and they're going to grow. That's where the sustained growth comes from."