March began the economic reopening, but its jobs report will hint at how fast things are getting back to normal
- The March payrolls report will preview just how fast the US labor market might recover.
- Data published Friday will likely show strong gains due to stimulus, vaccination, and reopening.
- Economists see the report kicking off a period of growth averaging 1 million payrolls per month.
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After months of either meager gains or unexpected losses, March is poised to be a turning point for the US labor market's recovery.
The Bureau of Labor Statistics will publish its nonfarm payrolls report for March on Friday at 8:30 am ET, providing the most detailed look at how hiring fared throughout last month. The backdrop is promising. March saw warmer weather and a faster rate of vaccination lead some states to partially reopen for the first time since the winter's dire surge in cases. Coronavirus case counts started to swing higher at the end of the month, but largely stayed at lower levels.
Democrats' $1.9 trillion stimulus plan was also approved early last month, unleashing a fresh wave of consumer demand and aid for small businesses. Sentiment gauges surged to one-year highs and Americans strapped in for a return to pre-pandemic norms.
Consensus estimates suggest March saw the strongest payroll gains in six months. Economists surveyed by Bloomberg expect nonfarm payrolls to climb by 660,000, nearly doubling the 379,000 gain seen in February. The unemployment rate is forecasted to dip to 6% from 6.2%.
Some on Wall Street are even more optimistic. March's release should kick off a "series of extremely strong jobs reports" with payroll additions averaging 950,000 per month through the second quarter, Bank of America economists led by Michelle Meyer said in a note. Unemployment will sink to 4.7% by the summer and sink another 0.2 percentage points by the end of 2021, they said.
"It's hard to keep up with this economy," the team added. "We think consumer spending is about to take off given the one-two punch of stimulus and reopening."
UBS holds a similarly encouraging outlook. Economists led by Seth Carpenter see the sharp acceleration in economic activity driving just as strong a jump in hiring. Payroll growth is forecasted to average 1 million throughout the second and third quarters as the economy reopens. With roughly 10 million jobs still lost to the pandemic, such a growth rate would recover more than half of the country's missing payrolls.
The bank also expects the unemployment rate to decline to 3.6% by the end of 2023, with the decline slowed by a swiftly rising labor force participation rate.
Data previewing the headline report show job growth breaking out of its middling trend. The US private sector added 517,000 jobs in March, according to ADP's monthly employment report. Though the reading landed just below the median estimate of 550,000, the increase was the largest seen since September and marked a third straight gain.
Separately, weekly jobless claims trended lower through the month, albeit at a sluggish pace. Claims rose to 719,000 last week, according to Labor Department data published Thursday. While an increase from the prior week's total, claims still dropped 3.5% month-over-month. And the previous week's reading was revised to 658,000 from 678,000, marking the lowest reading since the pandemic first slammed the labor market.
The Friday report will also highlight whether the recovery is evening out or if a K-shaped trend is growing worse. Unemployment rates for minorities continued to lag those for white Americans in February, and the bulk of early hires were for high-income workers. Preservation of the trend in March's data could signal that those hit hardest by the pandemic will be some of the last to recover.