• U.S. employers likely added 180,000 new jobs in March after the surprising small 20,000 additions in February. 
  • Average hourly earnings are forecast to rise 0.3% on the month and 3.4% on the year as more than 7.5 million jobs remain unfilled around the country.
  • Headline unemployment will likely hold at 3.8%, the lowest since 1969.

U.S. employers likely created around 180,000 new jobs last month, according to analysts' forecasts compiled ahead of Friday's March non-farm payroll report, but a weakening global economy and ongoing trade tensions could cap wage gains and the pace of job creation in the months ahead. 

The U.S. labor market, one of the economies major successes over the past two years, has cooled somewhat in 2019, with a stronger-than-expected 311,000 new jobs in January giving way to a modest 20,000 increase in February, the weakest in two years.

Since then, economic weakness in China, Europe and elsewhere, alongside softer housing and manufacturing data in the United States, has raised concern for a near-term recession as short term Treasury yields rose past those for benchmark 10-year notes for the first time since 2007 and the Federal Reserve cautioned that slowing global growth could spillover into the domestic economy.

"Financial markets are clearly worried about the threat of a US recession with the yield curve having inverted and futures contracts pricing in interest rate cuts from the Federal Reserve," said ING economist James Knightley. "However, we are more upbeat and believe that competition for labour gives workers a sense of job security and is leading to higher rates of pay."

"As such, while we acknowledge there are more headwinds for the US economy in 2019 versus last year we are in the camp that expects US monetary policy be left unchanged this year, especially with pay gains likely leading to broader inflation pressures," he added.

Average hourly earnings, a key financial market metric of the employment report given their link to consumer price inflation, are expected to have slowed to a monthly gain of 0.3% in March, following an out-sized 0.4% acceleration in February.

Still, with nearly 7.6 million jobs unfilled around the country, and the National Federation of Independent Business' survey on hiring showing that 37% of small businesses polled can't find workers to fill vacant jobs, labor market conditions remain tight and upward wage pressures could easily follow.

In fact, weekly jobless claims fell to just 202,000, according to recent data, the lowest since December 1969 and the Fed's latest Beige Book assessment said labor markets "remained tight for all skill levels, including notable worker shortages for positions relating to information technology, manufacturing, trucking, restaurants, and construction".

That might place added pressure on the Fed, as it grapples with the complexities of solid economic growth, modestly accelerating inflation and ongoing rhetoric from the White House and calls for a 50 basis point reduction in the current Fed Funds rate.

However, while most market forecasters expect the Fed to hold rates unchanged until at least early next year, and CME Group futures pricing in a 40% chance of a rate cut between now and January, Ian Shepherdson of Panthenon Macroeconomics thinks rising wages will play a key role in the Fed's decision-making.

"Whatever happened in March, though, we look for faster wage growth over the course of this year, and we continue to expect a 4% year-over-year print by the year-end," Shepherdson said in a client note Friday." If we're right, wage gains north of 4% would present a real problem for the Fed, especially if the trajectory is still upwards."

"That's our base case for early 2020, which is why we think the Fed will tighten again." he added.