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Political Economy
Posted at 06:00 AM ET, 04/01/2011

What to watch for in March jobs report

The Labor Department will issue its monthly reading on the state of the job market Friday morning at 8:30, giving the most important monthly read on the state of the economy. Forecasters expect that the solid improvement in the job market in February continued in March, with employers projected to have added 190,000 jobs and the unemployment rate expected to be unchanged at 8.9 percent.

The new number will set the tone for discussion about the economy over the coming months, and for debates over both the budget and Federal Reserve policy. Other economic indicators have been mixed lately, with most showing solid continued expansion but some disappointing reports on housing and durable goods orders raising doubts about the pace of recovery. Turmoil in the Middle East and the rising price of oil will have a negative impact, but there’s no way of knowing for sure how negative.

The jobs report will give an indication of the true path of recovery — accelerating, slowing, or staying the same. Here are four most-likely scenarios to watch for:

Steady as she goes: This is the consensus forecast. Call it payroll growth of 150,000 to 240,000 jobs and an unemployment rate either unchanged or moving up a tenth of a point. This sort of report would indicate that the gradual, steady recovery that has been apparent since the fall remains in place. While these sorts of numbers would offer further evidence that the recovery is well-entrenched, it would offer little evidence that it is taking off. The good news would be that it could ease some fears that higher fuel prices and geopolitical instability are weighing too much on growth. A slight rise in the unemployment rate would be unsurprising and could even be good news if it reflects more confident unemployed workers returning to the workforce.

Uh-oh: Payrolls rise by fewer than 150,000, and unemployment moves up over 9 percent. This sort of result would lead economists to seriously rethink their view that the economic recovery is well on track. Suddenly some of those other weak indicators, such as the February durable goods report, would seem less like aberrations and more like the beginning of a trend. It would suggest that the economy is being dragged down by more than just the direct cost of higher oil — that the political instability has had negative but hard-to-forecast impacts on business confidence and thus weighed on hiring. One factor that could play in: The February jobs report was inflated some by workers returning to the job after a snowy January. It’s possible that job growth wasn’t as strong last month as it appeared, in which case the March data could show a reversion to the mean. But still, this kind of soft job growth, barely enough to keep up with population growth, would be bad news.

Happy days are here again: Job growth over 240,000, perhaps accompanied by another tick down in unemployment. This would show that the economy is actually accelerating the way forecasters thought it would earlier in the year, shrugging off some of the forces weighing it down. It’s a sign that whatever is happening overseas, American employers are gaining confidence that the expansion is for real and showing it by putting people back to work.

April Fools: The report delivers mixed, confusing signals: Strong job growth accompanied by a sharp rise in unemployment, for example, or vice versa. This is what happened in the January report, with distortions from weather and seasonal adjustments making it a mess to interpret (that month it was very weak job growth combined with a steep decline in the unemployment rate). This is the kind of report that flummoxes analysts, markets and economic reporters in equal measure, and seems to happen once every few months.

By  |  06:00 AM ET, 04/01/2011

 
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