Monitor: Powering on

Jobs report preview

We estimate non-farm payrolls increased 220,000 in March, slightly above the current consensus of 210,000. Job growth is mainly driven by private service payrolls, which we estimate increased 180,000 in March down from a high of 245,000 in February. Signals for the labour market have been mixed lately. Jobless claims data continue to look solid, with initial claims back at cycle lows. On the other hand the ISM non-manufacturing index declined (though marginally) for the fourth consecutive month to 53.4 in February and the employment sub-index declined to 49.7, raising downside risks to employment growth in the service sector. We estimate the unemployment rate was unchanged at 4.9 % in March.

We estimate that manufacturing payrolls was unchanged in March. In February manufacturing payrolls declined as expected, as manufacturing employment growth had long been higher than indicated by the downward trend in the ISM manufacturing index. As the regional activity indices have been strong in March, we see indications that the manufacturing sector is finally rebounding and that manufacturing employment is stabilising.

Wage growth continues to be subdued despite the tighter labour market. Average hourly earnings increased 2.2% y/y in February as monthly wage growth slipped to 0% m/m. We expect wage growth to trend slightly higher over the coming months but, if continued, the increase in the participation rate seen over the past five months should ease the upward pressure on wages.

In the otherwise solid February job report, there was one note of caution. The average workweek slid from 34.6 hours to 34.4. This implied that although more people became employed the aggregate amount of hours worked declined. We would be glad to see a rebound in the average workweek in March.

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