NatWest: Soft Payrolls Preview

With just 200k for total nonfarm payrolls growth, NatWest have the third lowest forecast of the 74 responses in the Bloomberg survey, driven by weak surveys. Consistent with that, they see the unemployment rate unchanged but average hourly earnings growth in line with consensus at +0.4% M/M.

• They see payroll growth of just 200k, strong by historical standards but well short of the gains seen in January (481k) and February (678k).
• This reflects some payback for the surge in February, which partly reflected the fading of the Omicron wave, but also a (temporary) knee-jerk reaction to the invasion of Ukraine.
• Both the ISM manufacturing and service employment barometers weakened sharply, the NFIB survey showed a sharp pullback in hiring intentions and latest Homebase data implied close to no payroll growth in March.
• However, “while these gauges may portend a little slowing in the labor market, they could also be merely reflecting volatility” as other measures such as initial jobless claims have remained healthy.
• They see average hourly earnings up 0.4% M/M, although a calendar quirk could limit an expected rebound to some extent (the reference week was Sun Mar 6^th-Sat Mar 12, so the 15th of the month fell outside of the reference week which means increases in bi-monthly pay in the period were less likely to be captured in the survey).
• They also see average weekly hours steady at 34.7, leading to aggregate hours worked up +0.2% M/M after +0.8% in Feb, and the unemployment rate unchanged at 3.8%.