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Other Factors Add to Decline of Labor Participation

NEW YORK ( BBH FX Strategy) -- The March U.S. jobs report will be released Friday, Good Friday, when many European countries are on holiday and the U.S. is partially on holiday. Unlike the proverbial falling tree that may not make a sound if there is no one to hear it, the data will be important even if the lack of market participation prevents much of a reaction.

Given these circumstances, perhaps what will be more useful than a review of the limited inputs that economists use to forecast the nonfarm payrolls report -- which is among the more difficult of the high frequency data to forecast -- would be a more focused look at the vexing problem of the decline in the participation rate.

Let's dispense with the March jobs report by making a few observations. The risk is on the downside of the current consensus of 220,000 private sector jobs for two main reasons.

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The first is an appreciation of the distortion of the seasonal adjustment. The milder weather in January and February, which may have created more jobs/reduced layoffs, may be adjusted the other way in March. This dynamic should translate into less job creation in early spring. The second is simply that the four-week average of the weekly initial jobless claims was flat in the survey week in March compared to February.

It is tempting to think that the horrific construction spending report (April 2) also provides some downside risk to the NFP. February construction spending fell 1.1% rather than rise 0.8% as the consensus expected and, adding insult to injury, the January series was revised from a slight 0.1% decline to a 0.8% drop.

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