A person works on a Bowlus recreational vehicle at Bowlus’ factory in Oxnard, California, Feb. 23, 2024.

Timothy Aeppel | Reuters

The March nonfarm payrolls count likely will indicate hiring continuing at a solid pace, though some weakening foundations of the labor market could take greater focus when the Labor Department releases its key report Friday morning.

Job growth is expected to come in at 200,000 for the period, according to the Dow Jones consensus forecast. If that’s correct, it will mark a slowdown from February’s initially reported 275,000 but is still a strong pace by historical terms.

Yet a funny thing has been happening with the jobs reports recently: Initially strong numbers have tended to be lowered in subsequent estimates, raising questions about whether the jobs situation is as positive as it looks.

That will be just one of several key areas in focus when the report is released at 8:30 a.m. ET.

Strong, but how strong?

February’s release raised eyebrows with a gain that trounced the Wall Street outlook for 198,000 new jobs. Also gaining notice, though, were revisions to the prior two months that reduced December’s count by 43,000 to 290,000 and January’s by a whopping 124,000 to 229,000.

For all of 2023, revisions took 520,000 off the initial estimates — there are three readings in total — countering a historical trend in which the final numbers are generally higher than the first readings.

The trend “makes me wonder about the credibility of the first number,” said Dan North, senior economist at Allianz Trade Americas. “So I’ll be looking for the revisions from the prior month to see if they’re going to be knocked down, and most likely they will be. That’s why if you get a big number, take it with a grain of salt.”

There is some anticipation on Wall Street of an upside surprise: Goldman Sachs raised its initial forecast to 240,000, an increase of 25,000, following strong private payroll data from ADP showing a gain of 184,000 on the month, and other indicators.

Drivers of growth

Along with numbers, composition is important, namely where the growth is coming from and whether there are any cracks in the employment armor. The job market’s resilience has confounded many economists who spent the past two years searching for a jobs-led recession that never happened.

“Firms are seeing strong demand. They’ve dramatically increased their productivity, and so they’re hiring for different kinds of jobs,” said Luke Tilley, chief economist at Wilmington Trust. “That has enabled them to deal with the high-rate environment.”

Still, there are areas of concern.

Household employment, which counts individual workers rather than total jobs and is used to calculate the unemployment rate, has fallen by nearly 1 million since November. The survey is more volatile and uses a much smaller sample than the establishment count that yields the headline payrolls growth total. But there’s no obvious reason for the weakness, though some economists speculate it could involve the surge in illegal immigration over the past few years.

Also, full-time employment has declined slightly over the past year, while the rolls of part-time workers have swelled by more than 900,000. There also has been a sharp decline in temporary workers, a classic sign of a slowdown.

Inflation signals

Federal Reserve officials will watch all those factors for signs of inflation pressures. Stocks have been under pressure this week as investors worry about the direction of monetary policy.

Average hourly earnings are projected to have increased 0.3% in March, which would be a jump from 0.1% in February, though the estimate for the annual gain is 4.1%, or 0.2 percentage point less.

If the consensus calls are correct, it’s unlikely to move the needle much for the Fed, which is expected to begin cutting interest rates gradually starting in June, according to futures market pricing tracked by the CME Group.

“Unless there is a wildly positive or outright tragic employment report, they’re going to stay on course,” North said. “They’ve been really clear recently pushing back on the market, saying we’re in no big hurry, inflation is not down to 2%.”

North said he expects the Fed to wait until July before it starts cutting rates — contrary to current market expectations.

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