Jobs Back on Radar as Second Quarter Begins With a Spending Tailwind | Economy

Heading into February, the economy created an average of 230,000 jobs a month. Then came March and the Labor Department’s number for February surged to 275,000, blowing past estimates.

This Friday, the government will report the number of jobs created in March, and expectations are for a decline from February’s outsized gain, to around 200,000. So, the question this week for the economy and markets is whether the number will again surprise to the upside.

“Nonfarm payroll employment growth likely decelerated in March, holding the unemployment rate unchanged at a notch above the multi decade lows of the first half of 2023,” Comerica Bank economists wrote on Monday morning. “Average hourly earnings growth likely picked up on the month but slowed in year-over-year terms, indicating the modest margin of slack in the economy is slowing wage growth to a pace more typical of a balanced job market.”

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The monthly jobs number report will complete a week of data about the health of the labor market. On Tuesday, the number of job openings at the end of February is expected to show a slight dip, to around 8.8 million from 8.9 million a month earlier. But that is still a strong number and one that means jobs far exceed the available people to fill them.

Private payroll firm ADP will release its March monthly survey of employers on Wednesday. Analysts are looking for a gain of 150,000, a little higher than the 140,000 increase recorded in February.

The labor market is one of two critical factors the Federal Reserve is weighing when considering whether to lower interest rates. The other is inflation and that has also been coming in higher than estimates. The combination of better-than-expected economic data has markets no longer pricing in a cut at the Fed’s May meeting, with June now the target date for the first cut. But even that is becoming a question.

“We don’t see it as likely to be appropriate that we would begin to reduce interest rates until the Federal Open Market Committee is confident that inflation is moving down to 2% on a sustained basis,” Fed Chairman Jerome Powell said in a speech Friday. He added that the Fed was looking for “more good inflation readings like the ones we were getting last year.”

On one hand, the stronger economy is keeping rates higher. On the other, it is keeping people employed and consumers spending money. Last week saw fourth quarter economic growth being raised to 3.4% and a report that showed consumer spending increased in February by 0.8%.

“Where consumers are really splurging is on outlays in the service sector where real spending jumped 0.6%,” Wells Fargo economists wrote on Friday. “That is the biggest monthly jump in real services outlays since the wild summer of 2021 when consumers were still flush with pandemic-era savings and residual stimulus was still very much in play. “

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