March Employment Preview

On Friday at 8:30 AM ET, the BLS will release the employment report for March. The consensus is for 240,000 jobs added, and for the unemployment rate to be unchanged at 3.6%.

There were 311,000 jobs added in February, and the unemployment rate was at 3.6%.

From BofA economists:”For the March employment report, we forecast a 265k increase in nonfarm payrolls. … Weather is the main reason why we expect the pace of hiring to have moderated slightly in March. January and February were both unseasonably warm with limited snowfall, which according to estimates from the San Francisco Fed boosted growth in payrolls in both months. Climate data for March, however, is much more in line with seasonal norms. Therefore, we don’t expect to see the same weather boost. … we expect the unemployment rate to fall by a tenth to 3.5%. “From Goldman Sachs: “We estimate nonfarm payrolls rose 260k in March (mom sa) … We estimate the unemployment rate was unchanged at 3.6%.”• ADP Report: The ADP employment report showed 145,000 private sector jobs were added in March. This suggests job gains below consensus expectations, however, in general, ADP hasn’t been very useful in forecasting the BLS report.

• ISM Surveys: Note that the ISM services are diffusion indexes based on the number of firms hiring (not the number of hires). The ISM® manufacturing employment index decreased in March to 46.9%, down from 49.1% last month. This would suggest about 35,000 jobs lost in manufacturing. The ADP report indicated 30,000 manufacturing jobs lost in March.

The ISM® services employment index decreased in March to 51.3%, from 54.0% last month. This would suggest service employment increased 110,000 in March.

Combined, the ISM surveys suggest 75,000 jobs added in March (well below the consensus forecast).

• Unemployment Claims: The weekly claims report showed an increase in the number of initial unemployment claims during the reference week (includes the 12th of the month) from 217,000 in February to 247,000 in March. This would usually suggest more layoffs in March than in February.

• COVID: As far as the pandemic, the number of weekly cases during the reference week in March was around 165,000, down from 263,000 in February.

• Weather: In January and February, the San Francisco Fed estimated that weather adjusted employment gains added 150+ thousand to the employment reports, and there should be some payback in March.

• Conclusion: a 240K report would be solid given the various indicators suggesting a slowdown in the economy. Some of the usual indicators – like the ISM report and the unemployment claims – suggest a sharp slowdown in job growth in March. I’ll take the under this month.