Recently, there has been mixed signals regarding the US labor market. Data for jobless claims appear to remain strong. Meanwhile, the ISM non-manufacturing index dropped in February for the fourth continuous time to 53.4, while the employment sub-index dropped to 49.7. This increases risks on the downside to service sector’s employment growth.
“We estimate non-farm payrolls increased 220,000 in March, slightly above the current consensus of 210,000”, says Danske Bank.
Private Service payrolls mainly drive job growth that is likely to have increased in March by 180,000, as compared with February’s rise of 245,000, added Danske Bank. The bank forecasts that the US jobless rate remained at 4.9% in March and that manufacturing payrolls also remained unchanged in the month. Manufacturing payrolls in February had declined. Since the indices for regional activity have been solid in March, it suggests that manufacturing sector is recovering and employment in the sector is stabilizing, according to Danske Bank.
Meanwhile, in spite of a tight labor market, wage growth remains subdued. In February, average hourly earnings grew 2.2% y/y while wage growth on a monthly basis fell to 0%.
“We expect wage growth to trend slightly higher over the coming months but, if continued, the increase in the participation rate seen over the past five months should ease the upward pressure on wages”, says Danske Bank.