Another month of job growth above 200,000 expected for March despite signs of slowing economy

Energy Associated Press

U.S. employers are expected to have hired at another solid pace in March despite signs that the broader economy has weakened.

Continue Reading Below

Factories are facing a slowdown. Construction activity has slumped. Cheaper oil has led to cutbacks at energy companies. And consumers saddled by sluggish wage growth have been reluctant to spend their recent savings from cheaper gasoline.

Even so, economists foresee a 13th straight month of job gains above 200,000 — an encouraging sign for an economy that's still showing steady gains despite a harsh winter that squeezed growth.

Economists have forecast a job gain of 248,000 in March and predict that the unemployment rate will hold steady at 5.5 percent, according to the data firm FactSet. In February, employers added 295,000 jobs.

The jobs report will be released at 8:30 a.m. Eastern time.

Monthly job gains have averaged 274,667 since March of last year. That translates into 3.3 million more Americans earning paychecks than a year ago, an influx that should have helped power more consumer spending and growth. But factors ranging from snowstorms to a stronger dollar appear to have squeezed growth at the start of the year.

Continue Reading Below

Friday's jobs report arrives after the Federal Reserve signaled last month that it would be cautious in raising interest rates from record lows. The Fed has yet to rule out a June rate hike. But many analysts expect the first increase no earlier than September. In part, that's because Fed officials have revised down the range of unemployment they view as consistent with a healthy economy to 5 percent to 5.2 percent from 5.2 percent to 5.5 percent previously.

"September is most likely," said David Joy, chief market strategist at Ameriprise Financial. "But if we see a string of successively strong job numbers in the next three months, June is in play."

Chair Janet Yellen has stressed that even when the Fed begins raising rates, it will do so only very gradually.

A Fed rate hike would point to stable growth. But the economy has weakened in the first two months of 2015, in part because of the tough winter.

The Atlanta Federal Reserve estimates that growth was flat during the first three months of 2015. JPMorgan Chase says that growth is tracking at an annualized rate of 0.6 percent. Those forecasts are significantly below the annual growth rate of 2.2 percent in the final three months of 2014 and a rate of more than 4 percent in the middle of last year.

Winter storms caused housing starts and construction spending to drop in February. This could show up in fewer construction jobs being added in March.

Factory orders have been mixed, having dropped sharply in January before ticking up modestly in February. Cheaper oil has led energy companies to halt orders for pipelines and equipment, hurting manufacturers. At the same time, the strengthening dollar has made American-made goods costlier abroad, thereby cutting into exports.

Solid job gains have yet to ignite a larger boom in consumer spending. Average hourly wages have risen a tepid 2 percent in the past 12 months. McDonald's, Wal-Mart, the Gap and other major employers have announced raises for their lowest-paid employees. But those pay raises are staggered and unlikely to fuel faster wage growth.

"Giving workers at McDonald's-owned stores a raise looks nice back at headquarters and helps on the margins but is not enough to move the dial on overall wage growth across the country," said Megan Greene, chief economist at John Hancock Asset Management.

The economy has disproportionately added low-paying jobs in the retail and restaurant sectors since the recovery from the Great Recession began nearly six years ago. Adding jobs in the lowest-paid industries can suppress average hourly wages, even when employers are rewarding cashiers, waiters and sales clerks with pay bumps.

Bars and eateries accounted for 13.6 percent of the jobs added over the past 12 months, and retailers represented nearly 10 percent of the total gains.

Yet evidence of a strong spring rebound might hinge on hiring by retailers and restaurants, noted Tara Sinclair, a George Washington University professor and chief economist at Indeed, the job-posting web site.

Continued hiring by retailers and restaurants would suggest that employers anticipate solid demand from customers, who might finally be comfortable spending their savings from cheaper gas. Prices at the pump have plunged 33 percent over the past year to a national average of $2.40 a gallon, according to AAA.