While recent data has reignited fears about an economic recession, with JOLTs job openings at an almost two-year low and increasing initial jobless claims, outlooks for NFP numbers are not so bright.
On the other hand, the data suggests a return to more normal conditions in the US labor market and not a weak job market. The unemployment rate is expected to slow back to 3.5%, and Average Hourly Earnings are estimated to grow by 0.3%. During the fast recovery and a year after, we could see more than two vacancies per unemployed person, which can not be a sign of a healthy economy in normal conditions. With tightening financial conditions, the central bank has been looking for slower economic growth, and now Fed is much closer to its goals. In addition, the labor market is loosening with a reduction in job opportunities. This can reduce some of the wage inflation, helping the Fed in its mission of controlling inflation.
Stronger-than-expected NFP numbers could re-increase the chance of Fed Hawkish policy expectations, help the USD strength and raise the pressure on stock markets. On the flip side, a weaker-than-expected job market can also put the stocks under pressure, increasing the chance of a recession. In this scenario, the US dollar will face difficulties holding its gains.
The overall expectation for March labor market data is a 0.3% Average Hourly Earnings, 239K Nonfarm Payrolls, and a Participation Rate of 62.5%, which can decrease unemployment to 3.5%.
