Diane Swonk, chief economist at Grant Thornton, expects just 165,000 payrolls and said the unusual circumstances that hit jobs in February could continue to impact employment data. “A lot of it was the loss in construction and February was another polar vortex month, so some of that should just come back. There was noise from the government shutdown,” she said of February. She said manufacturing may not come back that much in March, due to the shutdown of GM’s Lordstown plant in early March.
“The way we read [the jobs report] last time, was that it felt like a shut down story that artificially raised payrolls in January and reduced them in February,” Gapen said. “Given the length of the shutdown, it may be that furloughed government workers and contractors went out and got part time work, and they were double counted. It would account for why January was so strong and February was weak.” January, in fact, was very strong, with an above trend 311,000 jobs created.
Sharif said the weather appears to have been a major factor in February’s weakness, with 390,000 workers saying they could not get to work due to weather, compared to an average 310,000 for Februarys going back to the late 1970s. More people also reported that they were forced to work part-time, he added.
The March employment report comes as some data has started to look better, like the closely watched ISM manufacturing survey, rebounding in March more than expected. The latest unemployment claims at 202,000 were the lowest since 1969, and , existing home sales rose 11.8 percent in February. Auto sales also improved in March, but February’s retail sales showed another month of softer than expected spending by consumers, a worrying sign.
“If we get a number like 175,000, 180,000 that tells you we’re moderating from last year’s average of 220,000. It’s still a good number, but not a 220,00 or 225,000, and it tells you [employment] is cooling like the rest of the economy is cooling off,” said Sharif. “Even if you get a good number and we get away from that narrative, and there’s no recession, it’s going to be hard for people to argue the Fed should raise rates because the inflation numbers are soft.” Sharif said he expects
PCE inflation to drop to 1.70 percent at the end of the month, below the Fed’s target of 2 percent.