Economists expect more “Goldilocks” data out of the world’s largest economy this week.
The US probably added around 215,000 jobs in March, the NFP consensus reckons. Although that’d mark a deceleration from the prior three months’ headlines, it’d also be the fourth consecutive month of payroll gains in excess of 200,000.
Assuming a consensus print, the three-month moving average would slip to 239,000, a healthy pace on any interpretation. If anything, it’s still too healthy for comfort in the context of stubborn services sector inflation.
Recall that February’s jobs report had something for everyone. Although the headline (a warm 275,000) technically counted as an overshoot, downward revisions took the edge off January’s blistering print which, as initially reported, stoked concerns about rekindled inflation.
Average hourly earnings probably rose 0.3% in March, according to forecasters. On that front, February’s release offered a welcome reprieve, when earnings grew just 0.1% from January, allaying wage-price spiral concerns stoked by the prior month’s upside surprise.
The best case scenario for the March update, plainly, would be a near-consensus headline NFP print and a cool read on wage growth. The Fed got a break late last week when PCE prices came in soft on the key “supercore” aggregate policymakers are eyeing as a barometer for disinflation. If the jobs report hands the Committee a second consecutive downside surprise on average hourly earnings, Jerome Powell and co. would have two pieces of evidence in support of the notion that CPI overshoots in January and February were in fact anomalous.
“The Fed’s focus on the ‘supercore’ measures of inflation (core services ex-shelter) and its strong correlation with wages reflects the relevance of the ongoing risk of a wage-inflation spiral,” BMO’s Ian Lyngen and Vail Hartman remarked. “It isn’t until April 10 investors will see the March CPI data and have greater clarity on the Fed’s willingness to downplay the January/February inflation prints.”
Assuming the monthly AHE print is indeed 0.3% (or somewhere thereabouts), it still counts as a little warm for a Fed fighting what, at this point, is a kind of insurgency: Inflation’s back-footed, but it hasn’t been stamped out entirely. On a YoY basis, earnings growth is seen at 4.1%, the slowest since mid-2021.
Admittedly, it’s tempting to dismiss the prospect of a big downside surprise on headline payrolls as too unlikely to warrant a lot of preemptive analysis. The household survey showed a third consecutive decline in the February release and bears continue to highlight the disparity between the two surveys as evidence that all’s not well. Maybe they’re right. Probably not, though.
Suffice to say a meaningful miss on the NFP headline would cement the case for a June rate cut, but that cut’s already pretty much in the price, and there’s no chance of a jobs headline bad enough to put the May meeting on the table. Fed officials, including Powell on Good Friday, continue to preach patience in the face of a resilient economy and an uneven (“bumpy,” to use the preferred description) disinflation path.
The unemployment rate’s seen at 3.8%. As a quick aside, note that economists are beginning to put the pieces together when it comes to explaining the US labor market’s “painless” normalization process: Immigration was, and will continue to be, a key factor.
In addition to the jobs report, investors will get the usual deluge of top-tier US releases scheduled for the first week of every month, including an update on job openings, ADP’s read on private hiring and the ISM releases, which’ll be scrutinized closely for any incremental clues on whether the next phase for the US economy is re-acceleration or deceleration.
Elsewhere, Europe releases inflation data for March ahead of the ECB’s April gathering, the Tankan survey’s due in Japan and traders will hear from a veritable procession of Fed speakers including Powell himself on Wednesday.
