Thursday, April 05, 2018

March Employment Preview

by Bill McBride on 4/05/2018 11:12:00 AM

On 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 175,000 non-farm payroll jobs in March (with a range of estimates between 112,000 to 225,000), and for the unemployment rate to decline to 4.0%.

The BLS reported 313,000 jobs added in February.

Note on Weather: Most estimates show that warmer than normal weather boosted February employment by 80,000 to 90,000 jobs, and there should be some payback in the March report.

Here is a summary of recent data:

• The ADP employment report showed an increase of 241,000 private sector payroll jobs in March. This was well above consensus expectations of 180,000 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 above expectations.

• The ISM manufacturing employment index decreased in March to 57.3%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll increased about 20,000 in March. The ADP report indicated manufacturing jobs increased 29,000 in March.

The ISM non-manufacturing employment index increased in March to 56.6%. A historical correlation between the ISM non-manufacturing employment index and the BLS employment report for non-manufacturing, suggests that private sector BLS non-manufacturing payroll jobs increased about 250,000 in March.

Combined, the ISM indexes suggests employment gains of about 270,000.  This suggests employment growth above expectations.

Initial weekly unemployment claims averaged 228,000 in March, up from 224,000 in February. For the BLS reference week (includes the 12th of the month), initial claims were at 227,000, up from 220,000 during the reference week in February.

The slight increase during the reference week suggests a weaker employment report in March than in February.

• The final March University of Michigan consumer sentiment index increased to 101.4 from the February reading of 99.7. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• Merrill Lynch has introduced a new payrolls tracker based on private internal BAC data. The tracker suggests private payrolls increased by 223,000 in March, and this suggests employment growth above expectations.

• Conclusion:  In general, these reports suggest a solid employment report.  However, there should be some payback from the weather boost in February.  My guess is that the employment report will be below the consensus in March.