Thursday, April 03, 2014

Employment Preview for March

by Calculated Risk on 4/03/2014 03:15:00 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 206,000 non-farm payroll jobs in March (range of estimates between 175,000 and 275,000), and for the unemployment rate to decline to 6.6%.

Note: It is difficult to predict how much hiring will be a "bounce back" related to the severe weather in December, January and February.   The economy only added an average of 129 thousand per month over the last three months, significantly below the trend of close to 200 thousand per month.   We might see some upward revisions to prior months, and not all of the missing jobs will return in March, but there will probably be some hiring related to better weather.

Here is a summary of recent data:

• The ADP employment report showed an increase of 191,000 private sector payroll jobs in February. This was close to expectations of 190,000 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 close to expectations.

• The ISM manufacturing employment index declined in March to 51.1%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll jobs decreased about 14,000 in March. The ADP report indicated a 5,000 increase for manufacturing jobs in March.

The ISM non-manufacturing employment index increased in March to 53.6% from 47.5% in February. A historical correlation between the ISM non-manufacturing index and the BLS employment report for non-manufacturing, suggests that private sector BLS reported payroll jobs for non-manufacturing increased 167,000 in March.

Taken together, these surveys suggest around 153,000 jobs added in March - below the consensus forecast.

Initial weekly unemployment claims averaged close to 320,000 in March. This was down from an average of 338,000 in February.   For the BLS reference week (includes the 12th of the month), initial claims were at 323,000; this was down from 330,000 during the reference week in February.

This suggests layoffs mostly in line with the consensus forecast.

• The final March Reuters / University of Michigan consumer sentiment index decreased to 80.0 from the February reading of 81.6. This is frequently coincident with changes in the labor market, but there are other factors too.

• The small business index from Intuit showed no change in small business employment in March.

• Conclusion: The ADP report was higher in March compared to the February report - and probably in line with most forecasts, the Intuit small business index showed no net hiring, and the ISM surveys suggest an increase but below the consensus.  However there will probably be some bounce back from the below trend employment reports over the last three months (weather related).

There is always some randomness to the employment report - and the timing and survey methods are different than for some other reports - but my guess is the BLS report will be close to the consensus forecast of 206,000 nonfarm payrolls jobs added in March.