March Jobs Miss 'More Noise Than Signal'

After two consecutive months of better-than-expected payroll growth, with January and February beating estimates by a combined 87,000 jobs, the United States suffered a significant miss in its March employment figures.

According to the Bureau of Labor Statistics establishment survey, total nonfarm payroll expansion amounted to 98,000 — slightly more than half of the forecasted 180,000. The figure represented a 55-percent drop from February’s 219,000 gain.

But one economist isn’t distressed.

“The March estimate of an increase of 98,000 reflected both seasonal noise and likely captured a slowing of overall business activity during the month,” RSM chief economist, Joe Brusuelas, told Benzinga. “During the first quarter of 2017, hiring averaged 190,000, which is in line with the 187,000 average per month during 2016, so apart from some noticeable payback for two strong months of hiring in goods producing and the seasonal noise in trade, transport and retail, the trend in hiring remains on track.”

Despite the overall miss in jobs growth, the economics report wasn’t entirely dreary. The unemployment rate fell 0.2 percent to a 10-year low of 4.5 percent, beating estimates and the previously calculated rate of 4.7 percent. Additionally, the BLS household survey reported employment gains of 472,000.

Policy Implications

“It is important to note that, in that survey, for the change to be statistically significant, it has to be +/- 500,000, so it is highly likely that this will not impress policymakers at the Fed nor stimulate an increase in the pace of policy normalization at the central bank,” Brusuelas said.

However, Allianz chief economic adviser, Mohamed El-Erian, disagreed. The Federal Reserve, he said, will be rocked by the numbers miss.

“This mixed to weak report complicates the Fed’s policy outlook and signals caution on the extent to which the recent rise in sentiment measures is being translated into favorable ‘hard’ data,” El-Erian told Benzinga.

TD Ameritrade Chief Market Strategist JJ Kinahan thinks that the March number seemed like one the market just wanted to "get out of the way" ahead of several other catalysts.

"We have the situation with Syria last night, we have Congress on a two week break. We know this number probably wont influence rates one way or the other, so let's get it out of the way and wait for earnings season next week," he said. 

He noted that Congress will have tax reform, healthcare, and a potential government shutdown on their plate when they get back from recess, all of which could have market implications. 

The Breakdown

Private nonfarm payroll growth (89,000) came in at about 50 percent of estimated value to denote a 60-percent month-to-month deceleration. Meanwhile, government payroll expansion offset the private-sector slowdown with 9,000 jobs.

The private sector sum reflected growth in professional and business services (56,000), health care (14,000) and mining (11,000) balanced by loss in retail trade (-30,000).

“The bottom line for the March employment estimate is that it’s more noise than signal,” Brusuelas said.

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