The March Employment Report

Nonfarm payrolls rose a bit more than expected in the initial estimate for March. While the monthly data are subject to statistical noise and seasonal adjustment difficulties, the underlying trend in job growth is likely moderating. That shouldn’t be a surprise. The job market is tight and firms continue to report difficulties in hiring new workers. Wage growth has trended higher, but not as much as one might expect with the unemployment rate at 3.8%. While a moderately strong report, details of the report were consistent with other mixed signs for the economy.

Prior to seasonal adjustment, nonfarm payrolls rose by 724,000 in March, a bit better than we saw a year ago (+703,000) and in March 2017 (+655,000). While not directly comparable to the establishment survey data, the household survey noted that 137,000 individuals could not get to work due to adverse weather during the survey week, vs. 159,000 a year ago and 164,000 in March 2017). In January, the weather was better than usual (adding to adjusted payroll growth), while February’s weather was worse than average (dampening the adjusted payroll gain). With those weather effects behind us, the March figures should, in theory, provide a clearer picture of the job market. Still, there is enough noise in the payroll data that it will take a couple more months of data to confirm whether job growth is returning to a more sustainable pace.

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The employment report showed declines in manufacturing, retail, and temp-help payrolls in March. Softer global growth and trade policy uncertainty have been negative for U.S. exports. Investors typically focus on the monthly ISM factory sector survey, which reflected strength in March. However, manufacturing payrolls fell by 6,000, while factory hours held steady. Aggregate manufacturing hours slipped 0.1%, up just 0.5% from a year ago. Retail payrolls have traditionally been taken as a signal of consumer spending strength. Retail payrolls fell by 11,700 in March, following a 20,200 decline in February – and were 0.2% lower than a year ago. Some of the weakness in retail employment may reflect the ongoing shift to online sales. However, December’s 1.6% drop in retail sales and mediocre rebound remains a puzzle – and the weakness in retail payrolls in 2019 may signal that the household sector fundamentals are not as strong as we thought. Temp-help payrolls are often viewed as an early indicator of job growth. Many firms will hire temporary workers before adding to permanent workers, especially if there is concern about broader economic weakness (that is, talk of recession). However, the normal monthly noise means that recent softness in temp hiring is inconclusive.