U.S. non-farm payrolls likely to increase in March, service sector to extend support: Danske Bank

The United States non-farm payrolls are expected to have increased by 160,000 during the month of March, a bit below the consensus estimate of 175,000. Further, the jobs report for March due on Friday will probably exhibit a slowdown in job growth compared to February.

The country’s service sector is further, expected to be the main driver of job creation and expect it contributed 160,000 new jobs. Manufacturing has been on a positive trend in terms of job creation, but is expected to have somewhat slowed in March, due to adverse affects of bad weather, Danske Bank reported.

The February report showed that 235,000 new jobs were created and that wage growth jumped back to its previous level of around 2.8 percent y/y. Thus, the jobs report for February was very strong. Although we expect the March report to be somewhat weaker, this should only be seen as a temporary effect from the weather. It is also worth noting that the February figures were particularly strong due to much milder weather conditions than usual.

As growth has picked up pace after the slowdown in H1 2016, jobs growth is expected to continue at solid levels in coming months, which should be sufficient to tighten the labour market further. That said, there is still slack left in the labour market, as the number of marginally attached, part-time workers for economic reasons is still high and long-term unemployed is still elevated.

"We estimate that unemployment remained at 4.7 percent and average hourly earnings increased 0.2 percent m/m, implying an increase in the wage growth rate of 2.7 percent y/y. We continue to expect the service sector to be the main driver of job creation and expect it contributed 160,000 new jobs. Manufacturing has been on a positive trend in terms of job creation, but we expect it slowed somewhat in March (also due to bad weather). Thus, we expect 15,000 new jobs were created in manufacturing," the report commented.