Expect a Bounce in March Jobs

Our forecast shows nonfarm payroll employment bouncing back to 165,000 jobs in March after edging up an almost imperceptible 20,000 in February. Private payrolls are expected to account for 160,000 of the March gains. Federal hiring was put on hold during the government shutdown while retirements are picking up.

We expect to see employment gains driven primarily by health care and professional services. Construction jobs should come back after suffering large, weather-related losses in February.

Leisure and hospitality jobs will remain positive but the sector has slowed considerably from the pace last summer and fall. The later-than-usual Easter likely contributed to weakness in March; April should be better.

Surveys for the manufacturing sector suggest that hiring is picking up. The manufacturing gains will be tempered by the high-profile closing of GM’s Lordstown, Ohio plant. Manufacturers have also told me that they are adding hours for existing workers instead of hiring up as they would have in the past because many candidates can’t pass drug tests.

Special factors to watch for include effects from severe flooding in the central Midwest and the unusually late timing of Easter. Flooding hit farms particularly hard, which could show up in the household survey as an increase in the number of workers idled due to extreme weather. Retail employment could turn negative for a second consecutive month on weak sales, the late Easter and more store closings.

Average hourly earnings are expected to rise 0.2% during the month, which would bring down the year-over-year increase to 3.3%. That is still better than much of the expansion but a shadow of prior gains. We have yet to see wage gains move up the food chain from entry-level workers to management. This is something we will be watching closely as a broadening of wage gains is necessary for the middle class to feel better about the future.

Average weekly hours are also expected to pick up slightly, which will add to monthly income growth during the month. The downside is gasoline prices, which are on the rise again. That is hardest on low-wage workers who were just beginning to feel the benefits of a long expansion.

Separately, the unemployment rate is expected to hold at 3.8%, just above the low of 3.7% hit late last year. The key is the labor force participation rate, which has been coming back. Women have regained all of the ground lost since the last peak in women’s participation during the 1990s boom. A surge in participation by millennial women (ages 25-34), mostly of Hispanic descent, has been the primary driver of those gains. We are watching for a pickup in the participation rate of prime-age white men with less than a high school diploma; that group has been the hardest to shift the needle on. There is a sliver of hope; the reasons that prime-age white men list for not participating have shifted from retirement and disability to caring for their families and going to school.

Bottom Line
Employment will post a comeback in March. The pace of employment gains, however, is expected to slow in 2019 from the pace of 2018. Part of the slowdown is due to weaker growth.

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