March Jobs Report Forecasts Show Still-Strong but Slowing Hiring Gains

Forecasts for the March jobs report show another month of strong gains, continuing to defy expectations that companies would start to pull back on hiring.

With the jobs report predicted to confirm that the economy remains healthy even as inflation pressures have again turned sticky, expectations have been diminishing for Federal Reserve rate cuts in 2024. However, though it’s believed the March data will show a strong job market, the central bank is seen as likely to cut rates in June.

The US economy is forecast to have added 200,000 jobs in March, according to FactSet’s consensus estimates. That’s lower than the 229,000 jobs gained in February and the 275,000 in January, but economists say it still reflects a healthy economy. “Overall, the labor market is still pretty strong,” says Tiffany Wilding, an economist at Pimco. She expects the economy added 190,000 jobs in March, slightly below consensus.

The report will be released on Friday, April 5 at 8:30 EST.

March Jobs Report Consensus Estimates

• Nonfarm payroll employment is forecast to rise 200,000 vs. its 275,000 increase in February, according to FactSet.
• The unemployment rate is forecast to drop to 3.8% in March from 3.9% in February.
• Hourly earnings are predicted to rise 0.3% on a monthly basis, up from 0.1% in February.

Wilding says January and February’s reports were stronger partly because seasonal adjustments in the government’s data haven’t caught up with how the labor market has not slowed down in the winter months the way it did before the pandemic. She points to sectors that saw elevated growth in January and February—leisure and hospitality, retail, transportation, and warehousing—that tend to be more affected by cyclical hiring trends. She expects seasonal trends to have less of an impact on March’s report, and as a result, distortions in those sectors should be less pronounced in the months ahead. “This March reading will give us a better sense for where the underlying trend is,” she says.

Bank of America analysts expect payroll gains in March to be driven instead by non-cyclical sectors like government and healthcare. They anticipate a 200,000 jump in jobs. Meanwhile, the ADP national employment report, released earlier this week, showed higher-than-expected private sector job gains of 184,000 in March, prompting analysts from Goldman Sachs to boost their forecast to 240,000 jobs added.

The JOLTS survey of job openings, released Tuesday, showed signs that the labor market remains healthy. There were 8.756 million job openings in February, slightly more than January’s reading. Economists expect a dip to 3.8% in the unemployment rate, which rose from 3.7% in January to 3.9% in February, after spending three consecutive months at January’s rate. Even at slightly higher levels, the jobs market is “still pretty tight,” says Wilding. “I wouldn’t get too worried about some of the unemployment rate rise that we’re seeing.”

Immigration Boosts Payroll Growth Trend

Away from the month-to-month gyrations in the jobs report, economists point to a longer-term trend supporting the continued strength in employment data: higher immigration.

Data for the monthly jobs report comes from two sources. An “establishment survey” of businesses is used to calculate the number of new jobs added to payrolls, while a separate survey of households is used to calculate the unemployment rate. Recently, the two surveys have been painting diverging pictures. Wilding says the household survey points to a recession as the unemployment rate ticks up, while the establishment survey shows “very strong growth.”

Wilding points to a recent surge in immigration, which has been better captured by the establishment survey, as the reason for the wedge between the two indicators. “I don’t think we’re going into recession,” she adds. The signals from the household survey don’t account for changes in immigration, which is “impacting both labor supply and demand.”

When Will the Fed Cut Rates?

As the Federal Reserve embarked on one of the most aggressive monetary-policy-tightening campaigns in history, market watchers worried that higher rates could damage the labor market and lead to a recession. But thus far, both the labor market and the overall economy have remained surprisingly resilient.

Now, along with inflation, the path of the labor market will be a major determinant of monetary policy. After the Fed’s March meeting, Chair Jerome Powell emphasized that the central bank would cut rates quickly if it perceived significant weakness in the jobs market.

Bond traders currently believe there’s a 56% chance that the Fed will cut rates in June, according to the CME FedWatch Tool, and they anticipate three 0.25% cuts by the end of the year. Traders have been steadily paring back their expectations for the scope and timing of cuts after hot jobs and inflation data. At the beginning of the year, they anticipated six cuts in 2024, with the first as early as March.

In a research note earlier this week, Bank of America analysts wrote that a March payroll report in line with their estimate of 200,000 new jobs “should reduce fears of reacceleration and the risk that the Fed cannot ease policy this year ... It should re-anchor expectations for a cooling labor market, but not one that is showing significant signs of weakness.”

Wilding points out that despite the current strength in the labor market, risks remain. Though Fed officials appear focused on beginning an easing cycle in the middle of the year, she says, “Inflation data is moving in the wrong direction.” Overly hot inflation could mean the Fed keeps rates higher for longer, which could have ripple effects throughout the economy.