WASHINGTON - U.S. job growth likely slowed in March as the boost from mild temperatures faded, but the gains were probably more than enough to push the unemployment rate down to 4.0 percent, indicating the labor market continues to tighten.
Nonfarm payrolls probably increased by 193,000 jobs last month, according to a Reuters survey of economists. Payrolls surged 313,000 in February as unusually warm weather saw construction firms hire the most workers since 2007. Temperatures returned to normal in March, with some snowstorms.
"The shift from unseasonably warm weather in February to more seasonably normal temperatures in March will depress job growth, likely in construction, retail, and leisure and hospitality," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.
March's anticipated job growth would be below the 242,000 average of the past three months. Still, it would be well above the roughly 100,000 jobs per month needed to keep up with growth in the working-age population.
The unemployment rate is forecast to fall 1/10th of a percentage point to 4.0 percent, which would be the lowest level since December 2000 and the first drop in the jobless rate in six months. Despite signs of rapidly diminishing labor market slack, wage growth likely remained moderate in March.
Average hourly earnings are expected to have risen 0.2 percent last month after edging up 0.1 percent in February. The gain would lift the annual increase in average hourly earnings to 2.7 percent from 2.6 percent in February.
Wages remain the weakest link in the tight labor market.
Economists say annual wage growth of at least 3 percent is needed to lift inflation toward the Federal Reserve's 2 percent target. There is hope that wage growth will accelerate in the second half of the year and allow the Fed to continue raising interest rates.
The Fed increased borrowing costs last month and forecast two more interest rate hikes this year. Economists did not see an impact on hiring in the near-term from a recent stock market selloff, which has caused a tightening in financial conditions.
THE STOCK MARKET AND SPENDING
Financial markets were spooked by fears of a trade war after the United States and China engaged in tit-for-tat tariffs. Those concerns have eased somewhat as Washington signaled it is looking to resolve the trade dispute with Beijing.
"If equity prices keep going down, that's going to put a crimp in spending, both because it will discourage spending and reduce household wealth, but we are not there yet," said Vincent Reinhart, chief economist at BNY Mellon AMNA in New York. "Most of the wealth that got destroyed over the past month is really paper wealth."
Despite the anticipated slowdown in job growth in March, the employment report is likely to underscore the economy's strong fundamentals, even as gross domestic product growth appears to have moderated in the first quarter. Growth estimates for the first quarter are mostly below a 2 percent annualized rate.
Growth in the January-March period tends to be weak because of a seasonal quirk. The economy grew at a 2.9 percent pace in the 2017 fourth quarter. Growth this year is seen boosted by a $1.5 trillion income tax cut package and increased government spending, which economists say will offset some of the impact from the stock market gyrations.
The unemployment rate has hovered at 4.1 percent since October as people piled into the labor market. The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, rose to a five-month high in February.
The return of cold weather and a shortage of skilled workers are expected to have slowed hiring at construction sites in March after payrolls in the sector surged 61,000 in February, the most since March 2007.
"Construction payrolls will rise, but by much less than in February," said Lou Crandall, chief economist at Wrightson ICAP in Jersey City, New Jersey. "Tight labor markets in the industry may make it more difficult to accommodate the normal spring ramp-up in headcounts."
Further job gains are expected in manufacturing after payrolls increased by 31,000 jobs in February. A slowdown in retail employment growth is likely after the sector posted the biggest job gains in two years in February.
Government employment is forecast to have risen modestly.