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Mar. Nonfarm Payrolls Preview: The Growth in Part-Time Jobs May Lead to An Overestimation of Employment Conditions

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Moomoo News Global wrote a column · Apr 4 04:12
March's nonfarm payrolls report will be released at 8:30 ET this Friday.The consensus estimate polled by Bloomberg shows that nonfarm payroll is expected to increase by 200K, down from 275K in February. The unemployment rate is expected to decrease from 3.9% to 3.8%.
Mar. Nonfarm Payrolls Preview: The Growth in Part-Time Jobs May Lead to An Overestimation of Employment Conditions
Economists haven't seen signs of a sharp slowdown in the labor market.Continuing Jobless Claims in the United States increased to 1819 thousand in the week ending March 16 of 2024, but still much lower than the average of 2761.70 Thousand from 1967 until 2024. Meanwhile, according to layoffs.fyi, the 7,262 job cuts occurredin March. This is trending lower after technology firms reduced more staff in January.
Mar. Nonfarm Payrolls Preview: The Growth in Part-Time Jobs May Lead to An Overestimation of Employment Conditions
The employment report could still reflect a healthy economy. “Overall, the labor market is still pretty strong,” states Tiffany Wilding, an economist at Pimco. She anticipates that the economy added 190,000 jobs in March, a figure that is somewhat below the consensus.
US ADP jobs rose 184k in March
Private businesses in the US hired 184K workers in March 2024, following an upwardly revised figure of 155K in February, and beating forecasts of 148K. This marks the largest surge in employment in eight months, with employment rising in services (142K), namely leisure/hospitality (63K), trade/transportation/utilities (29K), and education/health services (17K) while employment in professional/business activities declined by 8K. The goods-producing sector added 42K jobs, mostly construction (33K) and natural resources/mining (8K).
For job-stayers, year-over-year pay gains were unchanged at 5.1%. Annual pay growth for job changes accelerated sharply from 7.6% to 10.0%.
Exhibit: ADP Employment
Exhibit: ADP Employment
JOLTS Job Openings edge higher to 8.75 million in February
The number of job openings on the last business day of February stood at 8.75 million, the US Bureau of Labor Statistics (BLS) reported in the Job Openings and Labor Turnover Survey (JOLTS) on Tuesday. This reading followed 8.74 million (revised from 8.86 million) openings in January.
While job openings have been trending down over the last year and a half – a sign of cooling demand for labor – they remain above pre-pandemic levels.
During the month, job openings increased in finance and insurance (+126,000); state and local government, excluding education (+91,000); and arts, entertainment, and recreation (+51,000). On the other hand, job openings decreased in information (-85,000) and in the federal government (-21,000). Regarding regional distribution, job openings fell in the Northeast (-2,000), the South (-62,000), and the Midwest (-9,000), but rose in the West (+81,000).
Mar. Nonfarm Payrolls Preview: The Growth in Part-Time Jobs May Lead to An Overestimation of Employment Conditions
The Philadelphia Fed report shows that there is a risk of overestimation of U.S. employment
The BLS's original report showed an average of 230,000 new jobs per month in 2023, but the QCEW (Quarterly Census of Employment and Wages) revisions reveal the true average monthly job growth is only 130,000. Analysts believe that the actual job growth in the U.S. for 2023, achieved through substantial debt, is far below the effects claimed by the “Bidenomics” touted by the White House.
As for the reasons behind the discrepancy, analysts suggest that a part of the difference can be attributed to a significant increase in the number of people holding multiple jobs.
The U.S. Department of Labor has two key employment data sources that are essential for gauging the state of the job market:
· Establishment Survey (Number of Payrolls): Conducted by querying the number of positions on business payrolls, it may not fully reflect the actual employment situation, such as temporary workers. Although it is considered less precise, it has a major impact on the market due to widespread attention and media coverage.
· Household Survey (Actual Number of Employed Persons): Conducted by inquiring about the actual employment situation in households, this survey is more accurate than the establishment survey and covers a broader range of employment conditions, including freelancers, sole proprietors, people with multiple jobs, and temporary workers.
Historically, these two types of data have closely tracked each other for a long time. However, starting from March 2022, the establishment survey and the household survey have diverged significantly.
In the establishment survey, two jobs held by one person are counted as two employment positions, even though they are actually performed by the same individual. As a result, one person holding multiple jobs may lead to an overestimation of employment data in the establishment survey.
In the February NFP report, the Bureau of Labor Statistics adjusted the total employment number for December downward by 43,000, changing the originally reported figure of 333,000 to 290,000. The January 2024 employment figures were also revised downward significantly by 124,000, reducing the initially reported figure of 353,000 down to 229,000. As a result, the total employment for the period from December 2023 to January 2024 was 167,000 less than what had been initially reported.
In Friday's March NFP report, readers cannot estimate the magnitude of the revision for that month. The data collection has a sampling error. It has about a 90% level of confidence “that an estimate based on a sample will differ by no more than 1.6 standard errors from the true population value because of sampling error.”
What's the implication for the Fed?
Investors and the Federal Reserve still rely heavily on nonfarm payrolls data. After the Fed’s March meeting, Chair Jerome Powell emphasized that the central bank would cut rates quickly if it perceived significant weakness in the jobs market. Currently, the CME FedWatch Tool indicates a 62.3% probability of an interest rate cut in June.
In a research note earlier this week, Bank of America analysts wrote that a March payroll report in line with their estimate of 200,000 new jobs “should reduce fears of reacceleration and the risk that the Fed cannot ease policy this year ... It should re-anchor expectations for a cooling labor market, but not one that is showing significant signs of weakness.” However, if theresults released on Friday exceed expectations, it could bring additional shocks to the current market.
Mar. Nonfarm Payrolls Preview: The Growth in Part-Time Jobs May Lead to An Overestimation of Employment Conditions
Source: FXstreet, Morningstar, Trading Economics
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only. Read more
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