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Job Growth Likely to Be Steady but Unspectacular

Economists expect the economy is finally on the road to steadier job growth and likely added about 200,000 jobs in March.

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"I think we'll probably get private sector growth somewhere around the 200,000 mark and total around 175,000 to 180,000, depending on how bad the public sector layoffs are," said Diane Swonk, chief economist at Mesirow Financial. "Maybe we'll even get to 210,000. It's interesting that that's (a) great (number) now. We've really lowered our hurdle."

The slow growth in jobs, along with the depressed housing market, have been two weak pillars of the economic recovery. For the month of February, the economy added 192,000 jobs, and the unemployment rate was 8.9 percent. The March employment report is released at 8:30 a.m. Friday, and economists expect the unemployment rate to stay at 8.9 percent.

"I think the biggest thing that's going on is jobs are notching up, and I think in a very significant way ... to me that explains a lot — including the teflon stock market, as people refer to it," said Wells Capital Management chief strategist James Paulsen. He noted that jobless claims have held below the 400,000 level for the last couple of weeks and that the ADP private sector payroll report showed growth of 201,000 this week.

"I think some of (the stock market's gain) was really predicated on that looking up, and if it doesn't, you're going to fall back into what the impact of these high gas prices is without jobs," Paulsen said.

Investors are also watching the ISM manufacturing survey when it is released at 10 a.m. It is expected to be a strong 61, off slightly from last months' 61.4. Construction spending is also reported at 10 a.m., and monthly auto sales are released throughout the day.

Swonk said one concern for the jobs picture is the rise in gasoline prices, which she said could pinch lower end retailers and moderately priced restaurants, both big employers.

"It damages consumer spending growth, and yes it will impact hiring," said Moody's Economy.com chief economist Mark Zandi. However, he thinks the gasoline price rise has not yet dampened hiring. Regular gasoline was at a national average of $3.60 Thursday, according to the AAA Fuel Gauge Report.

Pimco market strategist Tony Crescenzi said incomes are up 5.1 percent and that should blunt the effect of rising gasoline prices on the economy. "The key really is that all employment indicators point to strengthening or accelerating job growth. The payroll growth is exceeding labor force growth, partly because of demographics. This means the jobless rate can continue to fall from here," he said.

Zandi though expects the unemployment rate to rise. "I expect it to go back up to 9 percent. I expect the labor force to pick up as the job market improves ... considering how weak the labor force has been, declines in participation have been very consistent ... My sense is that jobs will steadily improve this year, but we won't see a further improvement in the unemployment rate until next year," he said.

Zandi said it will be important to see that a wider array of industries are hiring. "It would be encouraging if that was going to continue and we saw more broadening out. It is showing steady broadening regionally," he said.

In addition to the March jobs report, traders are watching the parade of Fed speakers this week. On Friday, New York Fed President William Dudley speaks at 9 a.m. He is considered a voice of Fed leadership, and follows several Fed presidents this past week who have been particularly hawkish, even calling for an early end to the Fed's quantitative easing program.

Minneapolis Fed President Narayana Kocherlakota Thursday drove the dollar higher in late trading when he said quantitative easing has boosted inflation expectations more than he had anticipated and that higher short-term rates are possible in late 2011.

Brown Brothers Harriman currency strategist Mark McCormick said the dollar will probably not be impacted by the jobs report Friday. "Unless it's above 225,000 or below 160,000, it's a non-event," he said.

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