Jobs Report: Upside Expected, but Duds Have Been Norm
NEW YORK (
) -- The monthly spectacle that is the government's jobs report returns on Friday. This time around, analysts and observers expect March to show a big gain to payrolls.
The headline forecast tells the story. The market is looking for nonfarm payrolls to add 184,000 jobs, though individual estimates vary across a wide range, according to consensus figures provided by Briefing.com. That's a heady tally, considering employers shed 36,000 jobs in February and payrolls plunged by more than 700,000 in the same month last year.
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The nation's unemployment rate is expected to hold steady at 9.7%.
There is little doubt that the economy is improving on several fronts. But job creation remains a source of frustration. All is not as it appears in the March assessment, however, as observers are buzzing about a series of caveats.
Marc Pado, U.S. market strategist at Cantor Fitzgerald, explained the problem as many see it: Though the overall figure is expected to show a six-figure increase, the majority of the boost may result from a weather-related rebound and a pickup in Census worker hiring. And neither will cement confidence about
real
job growth.
Pado believes Census hiring may account for as much as 100,000 jobs added. Weather might have delayed start dates for certain jobs in February, skewing nonfarm payrolls. Because of that, he said, the latest report could reflect an additional 50,000 jobs.
"The market is going to overlook jobs that are government-created. So, right off the bat, they're just going to take those out of the number," Pado said. "There were a lot of jobs that simply did not get started, especially some of these infrastructure jobs where they were building roads, bridges and stuff like that. They got delayed. Just a hazard of winter."
"The bottom line is that you have this jobs growth, but it's only temporary," said Robert Pavlik, chief market strategist at Banyan Partners, noting that Census workers will lose their jobs once the number-crunching season dies down.
"Are they going to be using this money for discretionary spending? Probably not," Pavlik added. "They're not going to be rushing out for dinner with it. They're not going to be rushing out and buying iPads with it. The folks that are taking these Census jobs are folks that are unemployed, can't find a job. But you know what? A Census job is better than nothing and its going to be very curious to see how the Street reacts to it."
Subtract those from the forecast, and observers may see payrolls add 20,000 to 40,000 real, organic, economy-driven kind of jobs that observers want to see. That would be no small achievement, though not likely to engender the same excitement as the headline number.
Even that thesis was called into question on Wednesday after a separate report from
Automatic Data Processing
(ADP) - Get Report
said private sector employers shed 23,000 jobs from their payrolls last month.
Though layoffs have ebbed compared to last year, firms like
Chevron
(CVX) - Get Report
,
J.M. Smucker
(SJM) - Get Report
and
SuperValu
(SVU)
continued to announce layoffs in March.
Other recent data, such as the
Philadelphia Federal Reserve's
regional manufacturing report and
initial jobless claims figures, have pointed to a stabilizing labor market. Though the ADP report is seen as a less reliable harbinger of the BLS's data, the drop was enough to chill the
Dow
on Wednesday, which fell 0.5%. But the blue-chip average is approaching 11,000 Thursday, regaining its posture ahead of the report.
Noise abounds in the report, so a big question remains: how will the market react to the data? Complicating matters, the report will be released at 8:30 a.m. EST, but equity traders will have to wait until Monday to trade since the stock markets will be closed for Good Friday. The bond market will remain open, however, making it the focus of the morning.
"I think if we have a very strong number, you're going to see the 10-year really start to move up, really test 4% and possibly above that," Pavlik said, who's expecting a spike in the bond market if nonfarm payrolls edge up 250,000 or more. "That might end up scaring the overall market despite the indication of continued growth in the overall economy."
"I'd be very careful just trading on this news alone," Pavlik added. "I think a very strong number will be a negative for the overall market right now because of the reaction by the bond market."
Pado thinks the report needs to shy away from the outlier estimates to pacify investors.
"You don't want to see the extremes," Pado added. "Too negative -- say we're only at 150,000 or less -- means it's going to be a problem because we're not seeing real job growth. And that's going to be disruptive to the market. And if we see above, say, 250,000 or that higher extreme around 300,000, you'd see rates rise on the fear that the Fed will move away from its stimulative stance."
So, while much of the chattering class will digest the hoped-for payroll jump, some continue to sound cautious. The Labor Department estimates 8.4 million jobs were lost since the beginning of the recession. Beyond the 9.7% unemployment rate, the "unofficial" rate, incorporating those workers who grew discouraged and gave up looking for work, edged up to 16.8% in February.
Economists and analysts anticipate tomorrow's figure will be the beginning of a positive trend. Regardless of tomorrow's outcome, many don't anticipate anything to change the larger picture in the near term.
"Until we get clarity out of Washington, I don't think you're going to see any meaningful hiring in the U.S. because we don't know what the financial reform is going to be. We don't know what the cost of insurance is going to be. We don't know what taxes are going to be. Why would one want to hire?" said Neil Hennessy, portfolio manager at Hennessy Funds. "You're seeing things pick up a little bit but I don't think you're going to see unemployment get below 7.5% again."
-- Written by Sung Moss in New York