If you're thinking the March jobs report may sway the Federal Reserve's immediate thinking on interest rates, don't.
Even a blockbuster reading probably wouldn't move the needle toward an April interest-rate increase after Fed Chair Janet Yellen this week signaled a willingness to let the economy run hotter before acting again. Instead, the report will gauge whether the labor market is succumbing to the drag weighing on the economy itself — weak global demand.
"There's always that potential, but we've gone through several periods of concern about foreign developments and yet payrolls seem to have come through unscathed," said Dana Saporta, a U.S. economist at Credit Suisse Securities USA in New York. "It's not our outlook that foreign developments will weaken the labor market in the near-term, but if that were to happen, the overall strength of the recovery will be at risk."
Here's what else economists are looking out for in the Labor Department's report on Friday at 8:30 a.m. in Washington:
Job growth
Payrolls are expected to climb by about 200,000 workers in March, according to the median forecast of 84 economists surveyed by Bloomberg. In February, 242,000 jobs were added.
Some moderation is to be expected as it's "hard to maintain monthly payroll gains of over 200,000 as we get closer to full employment," Saporta said. A reading near the consensus "would be consistent with a strong, healthy labor market."
Risk of a weaker payrolls print has been signaled by the Institute for Supply Management's non-manufacturing index. The group's employment component posted sharp declines in January and February, showing contraction last month for the first time in two years. Since businesses in the services sector make up the lion's share of employment, it could be a warning signal for payrolls, said Robert Brusca, the head of Fact & Opinion Economics in New York.
The strong pace of job growth even as the economy slows is also worrisome, he said. The gain in gross domestic product cooled to a 1.4 percent annualized rate in the fourth quarter as businesses cut investment and exports suffered from weak overseas demand and a stronger dollar. The Federal Reserve Bank of Atlanta's forecasting model for GDP is predicting a 0.6 percent advance in the first quarter as consumers have reined in spending.
"I'm uncomfortable with what the job market has been doing — it doesn't make any sense to me," said Brusca, whose forecast for payrolls growth of 140,000 is among the lowest in the Bloomberg survey. "It's too strong. The economy just isn't as strong."
Wage gains
As payroll gains have remained solid, the focus has shifted to any signs that a much-needed acceleration in wages is on the way. Any pickup would also lend insight into prospects for inflation, which has been trailing the Fed's goal for more than three years.
While job creation hasn't skipped a beat, wages have been choppy lately. Average hourly earnings are projected to have climbed 2.2 percent in the year ended February, matching the prior month's increase. In January, the year-over-year gain was 2.5 percent.
