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WASHINGTON
(MarketWatch) -- Markets are braced for the weakest payroll growth in
two years in February, and economists say the biggest risk is that
hiring will come in below the 100,000 median forecast.
The Labor Department will report on the February payrolls numbers on
Friday at 8:30 a.m. The unemployment rate is expected to stay at 4.6%,
while average hourly earnings are expected to rise 0.3%.
"The 'whisper number' for payrolls seems close to 50,000, half of the
consensus expectation," said Drew Matus, an economist for Lehman Bros.
"Anything above 100,000 would be considered a strong number."
Matus, who's forecasting gains of 130,000 for February after 111,000 in
January, has one of the highest forecasts on the street. He said
there's a "general view" among traders that the number will be lower.
Most of his peers believe hiring was sluggish. Both the underlying
fundamentals of slowing growth and the particulars of last month's
weather point to one of the weakest payroll gains of the recovery.
February payrolls are the toughest of any month to forecast accurately,
said Ray Stone, chief economist for Stone & McCarthy Research, in
his preview. The weather and seasonal gyrations in retail and other
sectors can lead to some wild, unexpected swings.
"We regard the downside risk to our [110,000] payroll forecast as more pronounced than the upside risk," Stone said.
The weather
The weather could be a big factor. January was one of the warmest
Januarys in U.S. history. And the survey week was unusually dry,
keeping many seasonal workers on the payrolls deep into the winter
months. But February was cold and wet in much of the nation. A big
storm lashed the upper Midwest and Northeast during the week of the
government's monthly payroll survey.
The average temperature in the February survey week was 9.5 degrees
colder than the average temperature in the January survey week, Stone
said.
"The arrival of winter weather conditions across parts of the nation
will lead to a well-below trend rise in payrolls," wrote David Greenlaw
and Ted Wieseman, economists for Morgan Stanley, who are predicting
payroll gains of just 40,000. They expect "a significant job loss" in
construction industries of 50,000.
Stone expects construction payrolls to decline by 40,000.
Construction payrolls grew by 10,000 in December and 22,000, boosted,
some say, by the warm weather in those months. Construction payrolls
soared by about 1 million over the four-year housing boom.
Steve Wieting, an economist for Citigroup, expects the housing slump to
lead to big layoffs, but not quite yet. "We believe a weak homebuilding
season in the spring will generate greater weakness than seen so far,"
he said. He expects housing and related industries to shed 50,000 jobs
a month during the second quarter.
David Rosenberg, chief North American economist for Merrill Lynch,
expects as many as 900,000 job losses in housing and related fields
this year. See full story.
Fundamentals
There are also fundamental reasons to think hiring will be weak.
"Economic growth remains firmly below potential," said Daniel Jester, an economist for Moody's Economy.com.
Some of the recent data on the labor market have been weak:
- The ADP employment index showed 57,000 new private-sector jobs in February, the least since 2003. See full story.
- Jobless claims are at one-year highs. See full story.
Other indicators have been stronger:
- The employment index in the Institute for Supply Management manufacturing survey rose above 50% for the first time in four months. See full story. The employment index also rose in the nonmanufacturing index. See full story.
- The number of consumers saying jobs were hard to find fell to a five-and-a-half-year low in February.
- The Monster online employment index rose nine points to 177 in February, with online recruiting rising in 19 of 20 industries, in all nine Census regions, and in 44 states. The index signals "moderating job growth in the United States," said Steve Pogo Pogorzelski, international group president at Monster Worldwide. Bosses are concerned about employee turnover, he said.
