US NFP: Weather conditions to impact jobs report for March – Danske Bank

According to research team at Danske Bank, the jobs report for March due on Friday will probably exhibit a slowdown in job growth compared to February.

Key Quotes

“Although we believe that we will see continued progress in the labour market going forward, the March figures will probably be significantly affected by the severe weather conditions. We estimate non-farm payrolls increased by 160,000 in March, a bit below the consensus estimate of 175,000. We continue to expect the service sector to be the main driver of job creation and expect it contributed 160,000 new jobs. Manufacturing has been on a positive trend in terms of job creation, but we expect it slowed somewhat in March (also due to bad weather). Thus, we expect 15,000 new jobs were created in manufacturing.”

“The sector most severely affected is probably construction, which could be a quite strong negative drag on overall job growth. Note that job growth of 160,000 is still higher than the structural growth in the labour force. Hence, although we would usually label it as ‘weak’, it is strong enough to tighten the labour market. We estimate that unemployment remained at 4.7% and average hourly earnings increased 0.2% m/m, implying an increase in the wage growth rate of 2.7% y/y.” 

“The February report showed that 235,000 new jobs were created and that wage growth jumped back to its previous level of around 2.8% y/y. Thus, the jobs report for February was very strong. Although we expect the March report to be somewhat weaker, this should only be seen as a temporary effect from the weather. It is also worth noting that the February figures were particularly strong due to much milder weather conditions than usual.”

“As growth has picked up pace after the slowdown in H1 16, we expect jobs growth to continue at solid levels in coming months, which should be sufficient to tighten the labour market further. That said, there is still slack left in the labour market (see spider web chart on the next page), as the number of marginally attached, part-time workers for economic reasons is still high and long-term unemployed is still elevated.”