Thursday, April 02, 2015

Preview for March Employment Report

by Bill McBride on 4/02/2015 02:49:00 PM

Friday at 8:30 AM ET, the BLS will release the employment report for March. The consensus, according to Bloomberg, is for an increase of 247,000 non-farm payroll jobs in March (with a range of estimates between 200,000 and 271,000), and for the unemployment rate to be unchanged at 5.5%.

The BLS reported 295,000 jobs added in February.

First, from Goldman Sachs economist David Mericle: "We expect nonfarm payroll job growth of 220k in March, below the consensus forecast of 245k. Labor market indicators were generally flat or weaker in March, suggesting payroll growth somewhat below the recent trend. We expect the unemployment rate to remain unchanged at 5.5% and average hourly earnings to rise 0.2%, roughly in line with the recent trend rate of wage growth."

Here is a summary of recent data:

• The ADP employment report showed an increase of 189,000 private sector payroll jobs in March. This was below expectations of 225,000 private sector payroll jobs added. The ADP report hasn't been very useful in predicting the BLS report for any one month, but in general, this suggests employment growth below expectations.

• The ISM manufacturing employment index decreased in March to 50.0%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll jobs declined by 20,000 in March. The ADP report indicated a 1,000 decrease for manufacturing jobs in March.

The ISM non-manufacturing employment index will not be released until Monday.

Initial weekly unemployment claims averaged close to 285,000 in March, down from 305,000 in February. For the BLS reference week (includes the 12th of the month), initial claims were at 293,000; this was up from 285,000 during the reference week last month.

Generally this suggests fewer layoffs, seasonally adjusted, in March compared to February.

• The final March University of Michigan consumer sentiment index decreased to 93.0 from the February reading of 95.4.  Sentiment is frequently coincident with changes in the labor market, but this decrease is probably mostly due to an increase in gasoline prices in early March.

• Trim Tabs reported that the U.S. economy added 268,000 in March. This was up from their 215,000 and 245,000 range last month. "TrimTabs’ employment estimates are based on analysis of daily income tax deposits to the U.S. Treasury from the paychecks of the 141 million U.S. workers subject to withholding".

• On small business hiring: The small business index from Intuit showed a 15,000 increase in small business employment in March, up from 10,000 added in February.

Also on small business, NFIB reported: “Reported hiring in March was one of the best readings in the last decade eclipsing the substantial readings in January and February, but this might have reflected the heavy hiring over the past three months.”

• Conclusion: There is always some randomness to the employment report, and the indicators were mixed in March.    Manufacturing employment was probably down (especially in petroleum industries, and also due to the West Coast port slowdown).  However small business employment was probably up.

Year-over-year change employmentThis graph shows the year-over-year change in total non-farm employment since 1968.

In February, the year-over-year change was 3.3 million jobs.  Last March, the economy added 225,000 jobs according to the BLS, so anything above 225,000 (including revisions) will increase the year-over-year change (already highest since the '90s).