Unusually warm weather in January and February may have accelerated hiring in those months at the expense of additions to March payroll gains. The Bureau of Labor Statistics (BLS) reports that severe weather (e.g., the mid-March snow storms in the Midwest and Northeast) is more likely to reduce hours worked than workers on payrolls, but that “it is not possible to precisely quantify the effect of extreme weather on payroll employment estimates.”
In the Employment Situation report for March the BLS reported nonfarm payrolls expanded by 98 thousand and the prior two months were revised lower by a total of 38 thousand. The unemployment rate dropped to 4.5%, based on stronger gains in employed persons (472 thousand) than in the labor force (119 thousand), from the household survey. Average hourly earnings increased 2.7% from a year ago and the labor force participation rate was unchanged at 63.0%.
The slowdown in payroll gains was unexpected but understandable in hindsight. Strong gains in January and February brought the average for the first quarter to 178 thousand per month, only modestly below the 187 thousand monthly average in 2016. We expect payroll gains to reaccelerate in April with gains for all of 2017 comparable to those in 2016.