When will job creation accelerate?


INDICATOR: March ADP Jobs Estimate and Help Wanted Online

KEY DATA: Private Payrolls: 191,000; Small: 72,000; Medium: 52,000; Large: 67,000/Help Wanted Ads: -292,000

IN A NUTSHELL: "Jobs are being created and the only question is when the gains will truly accelerate."

WHAT IT MEANS: It's the week of Employment Friday so that means it's ADP Wednesday. The payroll services firm provides the first data driven estimate of what the government's private sector payroll numbers will look like and the March jobs forecast is not that bad. Yes, we would like to see the gains closer to 250,000 not the nearly 200,000 that ADP is projecting, but the details of the report are quite decent. Solid increases were seen in all sizes of firms and it is heartening that the biggest of companies are back in hiring mode. Now we need to get even more new positions in the small and especially mid-sized companies. The service-producing sector is also doing decently but again, we need to see new positions there around 200,000 and they were projected to be about 164,000 in March. That is, we are getting there but are not there yet. It is also important to remember that ADP greatly underestimated the February increase so don't be surprised if the Bureau of Labor Statistics' number is well above ADP's.

In another report, The Conference Board's Help Wanted Online Index posted a March decline that basically wiped out the February increase. Why that happened is unclear but the monthly changes have been wildly volatile for quite some time now. The first quarter average is similar to the solid level that we saw at the end of last year so job gains should hold up.

MARKETS AND FED POLICY IMPLICATIONS: It's all about jobs and how fast they grow so the unemployment rate can come down. We are likely to see a solid increase in March payrolls on Friday and I would not be surprised if the unemployment rate ticks down. The key, at least for me, is that the jobless claims numbers are nearing all-time lows when they are adjusted for the labor force. There are not a lot of people who are being let go and that ultimately means that hiring will pick up. We are positioned for a very strong employment report but whether it is in March or April or even May is hard to know. But it is coming. When it does, the inflation hawks at the Fed will undoubtedly ramp up their screeching and they will have a point. Fed Chair Yellen hasn't made it clear what group of indicators she is using to determine the tightness of the labor market but if job growth accelerates, the unemployment rate falls and quits increase, as I expect, then the signs will be there. That would probably worry investors who are still soothed by claims that rates will be kept low for a long time. Since a long time is only six months, they shouldn't feel that secure.

Joel L. Naroff is the co-author, with veteran journalist Ron Scherer, of "Big Picture Economics: How to Navigate the New Global Economy". Release date is April 21, 2014.

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