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Look for March Payroll Growth to Slow

March Employment Primer

RFP
Payroll employment is expected to slow to 170,000 in March from 313,000 in February. Our forecast shows private sector payrolls adding 165,000 down from 287,000 the prior month. Unusually bad weather is the primary reason we expect to see a deceleration in employment between February and March. That resulted in cancelled flights and halted construction. The storms across the Eastern seaboard hit during the week that the survey for employment was taken.

The bad weather likely sidelined hourly workers while better-paid salaried workers continued to receive paychecks; a similar phenomenon occurred in January. Retail jobs likely suffered as few people were eager to buy spring clothes while they were still wearing their winter coats and boots; some may not have been able to get out to their favorite restaurants. Vehicle sales, which jumped in March appeared to be an exception. It’s not clear how many of those vehicles sold represent replacement demand after the heavy snow and floods that damaged a lot of vehicles.

Teacher hiring is continuing at the state and local levels although pay is clearly an issue in some markets. Teachers in West Virginia, Oklahoma and Kentucky have gone on strike in recent weeks in their efforts to get better pay. Federal government payrolls have been weak except for hiring by the U.S. Post Office, which is scrambling to replace retiring baby boomers. In the private sector, some firms have begun to offer partial retirements to retain older, more experienced workers.

Average hourly earnings are expected to rise 0.3% compared to February and 2.8% from one year ago. That would mark an acceleration from the subdued 2.6% year-over-year pace of February. Anecdotal reports of wage gains have surged in recent weeks. CEOs across industries report the need to raise wages as well as offer signing bonuses.

The unemployment rate is expected to edge down a tick to 4%. We expect to see the number of people joining the labor force to moderate after surging in February. Weather is one reason because fewer people could get out to look for work given the bad weather conditions during the month. The hope is that we pull more people back into the labor force as labor markets continue to tighten.

About the author
Diane Swonk Diane Swonk
Chief economist
Twitter: @DianeSwonk


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