PIMCO: Expected rise in payrolls US

March 9, 2023

By Tiffany Wilding, North American Economist, and Allison Boxer, Economist, at PIMCO

'We think there are upside risks to consensus expectations for payrolls, and are looking for 300k rise in payrolls versus consensus 215k.'

'Our view that risks are to the upside is based on a few different temporary factors:

First, we still think that the seasonal factors will provide support to sectors like retail in February. We think the seasonals still aren’t properly accounting for less hiring in Nov/Dec and then fewer separations in both Jan and Feb. We saw this last year as well, and if we use last year as a template for what could happen this year, we could see another solid print in February.

Second, we also think the rise in layoffs announcements that occurred in January are not likely to appear in the employment report until March or April. The U.S. requires companies with more than 100 employees to provide 60 days of advance notice of large scale layoffs (WARN). Google, for example, announced layoffs on January 20th with a 60 day notice period, suggesting it wouldn’t be counted until the April employment report. The establishment survey is based on earnings, not employment status, and therefore we think that workers that may not be physically present at these companies any more but are still under the notice period are likely to count towards payrolls for now.

Third, jobless claims and other intra-month indicators continued to remain resilient through the month. However, our above consensus expectations still includes a material slowdown relative to last month (517k), as more normal winter weather and government hiring relative to January should still see a notable slowing month-over-month (m/m).

We also think hours are likely to tick back down from outsized strength in January and see average hourly earnings ticking up from 4.4% year-over-year (y/y) to 4.8% y/y, due in part to base effects. Our forecast would also see the unemployment rate unchanged near record low levels (3.4%).'