Concerns seem to have done a lot of hiring in March, and if Friday’s jobs report is as strong as expected, it could go a long way so as to approach reducing speculation that a recession is coming and that the Fed will have to cut interest rates to stop it.
“It’s an important number. I will heave an all clear banner if the number’s good,” said Michael Gapen, chief U.S. economist at Barclays. Gapen expects 175,000 matters, wage growth of 0.2 percent and a lower unemployment rate, at 3.7 percent.
“This is one of the numbers that’s successful to help shape market expectations for what the Fed needs to do and where the economy is going,” said Societe Generale postpositive major U.S. economist Omair Sharif. Sharif is forecasting 200,000 jobs.
Economists have been blaming February’s job delicacy and the uneven quality of first quarter data, in part, on the five-week government shutdown and brutal winter weather in January and February. The reckon of economic reports that fell short of expectations have far surpassed the ones that were better, and the Citi Commercial Surprise index, which tracks the difference between them, fell to its lowest level since June, 2017.
Diane Swonk, chief economist at Gift Thornton, expects just 165,000 payrolls and said the unusual circumstances that hit jobs in February could proceed with 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 upstanding come back. There was noise from the government shutdown,” she said of February. She said manufacturing may not come shy away from that much in March, due to the shutdown of GM’s Lordstown plant in early March.
“The way we read [the jobs report] last one of these days, was that it felt like a shut down story that artificially raised payrolls in January and reduced them in February,” Gapen stipulate. “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 facsimile counted. It would account for why January was so strong and February was weak.” January, in fact, was very strong, with an primarily trend 311,000 jobs created.
Sharif said the weather appears to have been a major factor in February’s foible, with 390,000 workers saying they could not get to work due to weather, compared to an average 310,000 for Februarys universal back to the late 1970s. More people also reported that they were forced to work part-time, he augmented.
The March employment report comes as some data has started to look better, like the closely watched ISM origination survey, rebounding in March more than expected. The latest unemployment claims at 202,000 were the lowest since 1969, and , subsisting home sales rose 11.8 percent in February. Auto sales also improved in March, but February’s retail trades showed another month of softer than expected spending by consumers, a worrying sign.
“If we get a number like 175,000, 180,000 that let slips 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 [craft] 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 anecdotal, 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 lighten.” 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.
First part growth forecasts have been rising with new data releases, and now some economists expect growth at more than 2 percent, sooner than the 1 percent pace expected several weeks ago. As the outlook for growth stumbled in the first quarter, the Fed signaled it was on keep back and dropped its forecast for two rate hikes this year to no rate hikes.
But markets took the Fed’s dovishness as a sign the conciseness could be in even worse shape and the Fed would have to actually cut rates in 2019 to prevent a recession. The White Enterprise also is calling for a half percentage point rate cut, even though most economists are not forecasting rate pieces this year.
The gloomy mood of the first quarter has faded somewhat and markets have reflected improved wants, particularly the bond market. The yield curve had inverted to where short term rate were rising unaffected by long term, but the market has reversed that recession warning in the spread between the 3-month Treasury bill and 10-year Exchequer note.
Stocks have also been rising, and the S&P 500 is up 2.7 percent in the past month. The 10-year concede, after falling below 2.35 percent, was at 2.51 percent Thursday. Yields move opposite price.
Ed Keon, chief investment strategist at QMA, revealed as the data has improved he has become more confident in stocks. “I’ve been skeptical, but I’ve become more optimistic that the terseness has more legs and the stock market as well,” said Keon. “I think the PMI data out of China was a real game changer. Europe quiet looks very weak but if China is starting to turn around, and they’ve certainly thrown a lot of fiscal and monetary stimulus at it, that intention pull up other economies with it. In the U.S. the data has gotten better again, and the odds of recession are getting pushed out further. If you do get a bounce in China, the international drag, though there will be some from Europe, could be less and we may end up having a opulent landing.”
In the bond market, traders say some investors were lightening positions ahead of the jobs report.
“I meditate on the bond market is expecting a number consistent with the last six moths of NFP [nonfarm payrolls] which works out to be 180,000,” swayed Ian Lyngen, U.S. fixed income strategist at BMO. “For the first time in the last six months, the actual headline NFP number is more outstanding than average hourly earnings.”