‘Tipping Point’: What To Know About Good Friday’s Jobs Report

Another blockbuster jobs report is coming. Or so we’re told.

Employers likely added 643,000 positions in March, economists reckon, a hiring bonanza that will manifest in the best headline NFP print since October.

“Best since October” doesn’t sound particularly noteworthy, but remember, this is all still in the pandemic context. Outside of that context, a 643,000 print would be rather anomalous. The figure (below) trims the scale on the y-axis in order to make the chart legible. My apologies if that feels somehow inhumane — the chart effectively treats 15 million people who lost their jobs in April of last year as though they don’t exist. Hopefully, by having explicitly mentioned them, I’ve kept the memory of their loss alive.

At the risk of coming across as unduly naive vis-à-vis the capacity of a pathogen to adapt and ruin the best laid plans of men, I’d like to think labor market gains are less tenuous now than they were last year, pre-vaccine. In other words, this 643,000 may be less vulnerable to “give back” given the assumed proximity of herd immunity (to the original variant, anyway).

Europe’s unfortunate backsliding notwithstanding (read: fingers crossed the European experience doesn’t cross the Atlantic), the odds seem to have shifted in favor of a durable reopening of the US services sector. Between pent-up demand, elevated savings and, colloquially, cabin fever, the outlook for high-contact, person-to-person businesses is the best it’s been since before the pandemic.

If March payrolls lives up to lofty expectations, it will be an encore. February’s report, you’ll recall, was a blockbuster and the gains were almost solely attributable to leisure and hospitality. Within leisure and hospitality, the food services and drinking places category was a boon, and that’s good news both for the economy and for America’s legions of beleaguered restaurant workers.

“February’s strong showing in service sector hiring reinforces the notion that reopening timelines have been brought forward as the drive toward inoculation has seen initial success,” BMO’s Ian Lyngen and Ben Jeffery said. “Biden’s pledge of 200 million doses by April 30th served to further buoy confidence in a quicker road to economic recovery than initially assumed as 2021 got underway,” they added, before cautioning that “by bringing forward service consumption via earlier-than-expected reopenings, the outcome could ultimately be front-loading real GDP to the first half of the year, only to set an unreasonably high bar for the balance of 2021.”

Even if it turns out to be wishful thinking, it’s worth noting that if the March print does come in around 640,000, that would mean the US economy added nearly 1.2 million jobs in three months, depending on revisions. We’d still be nearly 9 million short of pre-pandemic levels, though (figure below).

“The March jobs report will mark a tipping point, whereby the economy clearly shifts into a much faster pace of growth — one not witnessed in a generation,” Bloomberg Economics said.

Jobless claims fell to a pandemic low last week, dropping below the pre-COVID record high for the first time since the onset of the crisis last year.

Notably, March payrolls comes on Good Friday. “The market is now anticipating a massive upside surprise in the US NFP print (whispers pushing into the millions vs 600k estimate) and UER data releases… but which just so happens to come on Good Friday, with the equities market closed and bonds closing early,” Nomura’s Charlie McElligott remarked.

“The concern is that this recent short-term mechanical ‘rebalancing rally’ in US Treasurys looks like a head-fake, risking a turn into yet another floodgates ‘sell bonds’ trade following this (potential) monster data [into] a holiday-shortened, illiquid bond market with equities in even worse shape, unable to trade any move until Sunday night and Monday,” he added.

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