What to expect in the next Nonfarm Payrolls report?

The Nonfarm Payrolls report is expected to show that the US economy may have created 200,000 jobs last month, down from a 275,000 increase registered in February. January’s data was significantly revised down to show 229,000 jobs created instead of 353,000 as previously reported.

The Unemployment Rate is likely to hold steady at 3.9% in the same period. Meanwhile, Average Hourly Earnings, an important gauge of wage inflation, is set to rise 4.1% in the year through March, cooling off slightly from February’s 4.3% growth.

The headline NFP figure, along with the previous revisions and wage inflation data, will hold the key to affirm the market expectations of a Fed interest rate cut as early as June. The probability that the Fed will begin lowering rates in June stands at 62%, according to the CME Group’s FedWatch Tool, up from the 58% shown at the start of the week on Monday.

The revival in the dovish Fed expectations could be attributed to the recent commentaries from the Fed policymakers and the weaker-than-expected US ISM Services PMI, as markets paid little heed to strong US JOLTs Job Openings and ADP Employment data.

Amidst the recent Fedspeak, Fed Chairman Jerome Powell on Wednesday reassured markets of the likelihood of interest rate cuts this year. Powell said that "if the economy evolves broadly as we expect," he and his Fed colleagues largely agree that a lower policy interest rate will be appropriate "at some point this year." Meanwhile, Fed Governor Adriana Kugler said early Thursday that she expects the disinflation trend will continue, which will pave the way for the central bank to cut interest rates.

Meanwhile, the US private sector added 184,000 jobs in March, a decent increase from the upwardly revised 155,000 print in February, the ADP reported on Wednesday. The data beat the analysts’ estimates of a 148,000 job gain. US job openings rose by 8,000 to 8.756 million on the last day of February, the Labor Department's Bureau of Labor Statistics said on Tuesday. The market forecast was for an 8.74 million reading.

Previewing the March jobs report, TD Securities (TDS) analysts said: “We look for job growth to have lost further momentum in March following the boomy Jan/Feb gains that came in the 200k-300k range. Household survey noise will keep the UE rate volatile, however, we expect it to stay unchanged at 3.9%.”

“We also look for wage growth to move back to the 0.3% m/m pace —and down 0.2pp to 4.1% y/y— after the ups and downs of the last couple of reports,” the TDS analysts added.