First!

Here we go, Mouseketeers. It’s Job Friday, and it’s Good Friday, and it will be Passover this evening. So the highways are lightly treaded, Times Square is quiet, and the trading pits are silent (mostly). So it will be interesting to see what, if any, reaction this report gets in the bond market.

That said, I can tell you where people are, and that’s in this newsroom. Who can pass up a Jobs Friday?

Among the things we’re watching: The economy has added at least 200,000 jobs a month—every month—for the last year, including an eye-popping 423,000 gain in November. While 200,000 may be a psychological threshold, it’s still been an impressive streak of job creation, unmatched since a 13-month run in 1994-95. The pace of hiring could slow a bit in March from the 288,000 monthly average over the prior three months, amid other signs of slower growth in the U.S. economy during the early months of 2015. Keep an eye on revisions to the January and February data, as well.

While forecasts call for 248,000 jobs added in March, some market watchers expect a more disappointing print, as we highlighted in Friday’s Morning MoneyBeat. With the first rate increase in nine years looming over the market, and the good-news-is-bad-news trade in play, stocks may welcome a below-consensus number though.

The recovery’s missing ingredient has been wage growth, stuck around 2% a year for the last half-decade. Average hourly earnings of private-sector workers in February were $24.78, up—you guessed it—2% from a year earlier. But Patrick O’Keefe, director of economic research at accounting and consulting firm CohnReznick, thinks earnings could pick up in March as more employers raise wages to retain and hire workers in a tighter labor market. “I think there is growing evidence that we are finally—and it’s been a long time coming—seeing some acceleration in earnings growth,” he said. A note of caution: Monthly wage growth has jumped several timesduring the recovery, then quickly faded.

The unemployment rate fell in February to 5.5% from 5.7% in January and 6.7% a year earlier. But weakness remained below the surface of the workforce. The labor-force participation rate was 62.8%, stuck near the lowest level since the late 1970s. A pickup in March could signal that a healthier job market is drawing discouraged workers off the sidelines—and its absence could be equally telling. The picture is a little brighter when it comes to the employment-population ratio, which measures the share of the population 16 years and older with a job. It was 59.3% in February, flat from the prior month but up from 58.8% a year earlier.

Here’s the rundown on what little market action there is. The futures market is little changed. Dow futures are down 3, S&P futures are up less than a point. The yield on the U.S. 10-year Treasury note is at 1.90%, virtually unchanged from yesterday’s close.

With the holidays and all, the markets will either be so limpid as to not move no matter what the number is, which would be my guess, or will pinball wildly as a few players push it around. I think that’s unlikely, though.

Watch how the mix of payroll jobs changed in March. One soft spot could be energy, where the plunge in crude oil prices since mid-2014 has squeezed domestic drillers and the various industries that support them. In addition to the mining sector, where jobs declined by 9,000 in February, pain could spill over into manufacturing. U.S. Steel Corp., for instance, has announced layoffs in recent months partly due to weak demand from energy firms.

Investors have largely cheered any hints that a rate increase may get pushed out past June, and they have sold on news that suggested that the Fed may act sooner rather than later. Each of the past four jobs reports beat expectations, but stocks fell in the following sessions as markets fretted that a June rate rise was very much on the table.

If Friday’s report comes in better than expected, it could lead to a downswing in stocks. But that would not play out until Monday as the stock market is closed Friday ahead of the Easter holiday.

Distribution of payrolls forecasts in WSJ survey pic.twitter.com/s1qYVVCqGZ

— Justin Lahart (@jdlahart) April 3, 2015

We’ve been harping on the wages thing for years, and will welcome it warmly when it finally arrives. But it isn’t at all clear that it has arrived, even with the high-profile news of companies like McDonald’s raising wages.

Here’s a few thoughts from Carl Tannenbaum, the chief economist at Northern Trust:

“Robust wage growth continues to be the missing piece in the labor market picture. The nature of jobs created and accumulated pent-up wage cuts attributed to the lack of growth.

“Recent reports of companies raising compensation of their lowest-paid employees supports expectations of a pickup in labor compensation.

“Productivity has been advancing much more modestly. When a flat labor force increases its productivity at less than 1% annually, it creates limited potential for economic growth. Soft productivity growth makes labor less valuable and increases the challenge of reaching full employment.”

Robert Kavcic, senior economist at BMO Capital Markets, recently lowered his forecast for the payroll number, anticipating a read below consensus:

“Given the disappointing +189k print in the ADP report yesterday, and another slide in the employment component of the manufacturing ISM, we’ve cut our estimate for payroll growth to 200k in March (previously 250k).”

The official unemployment rate, known as the U-3, doesn’t tell the whole story. Some 6.6 million people in February were stuck in part-time jobs because they couldn’t find full-time work and an additional 2.2 million Americans wanted a job but hadn’t looked for one in the last month. A broader unemployment rate known as the U-6, which includes those people, was 11% in February. That measure has declined in recent months, but the gap between it and the narrower U-3 gauge has widened since the prerecession years—a sign of stubborn underemployment.

Quickly people, guesses?

I’m going low. 215,000, rate hikes up to 5.6%.

Millan Mulraine, deputy head of U.S. strategy at TD Securities, says a disappointing payrolls report – below 248,000 consensus – will likely serve as a setback for Federal Reserve hawks pushing for a midyear increase in rates. He expects payrolls rose 221,000 in March and guesses the risk of jobs growth slipping below the “psychological” 200,000 mark is low.

I’m saying 198,000 and 5.6%. Just not feeling this one.

220,000. That’s my best guess for jobs added in March.

Ahead of jobs report, @CMEGroup futures imply just 6.4% odds of June rate increase, only 33% by September #NFPguesses

— Spencer Jakab (@Spencerjakab) April 3, 2015

126.000.

That’s a miss.

126,000 jobs added in March, way under the 248,000 consensus.

Unemployment rate flat at 5.5%.

Average hourly wages up 2.1% from a year ago, about in line with where they’ve been lately.

February revised down to 264,00 from 295,000.

January was also revised lower. Earlier it was plus 239,000. Now it’s plus 201,000. Add it together with February and  the economy adding 69,000 fewer jobs in the two months than previously estimated.

Well, this was a surprise. The economy added only 126,000 jobs in March, the slowest pace since December 2013. Along with the downward revision to January and February’s numbers, the hiring pace in the first quarter slowed to 197,000, down from an average of 324,000 in the last three months of 2014.

It may sound surprising, but it isn’t really. Most of the other economic numbers have been pointing to a slower growth rate. The jobs report seemed to be the outlier. Now we see, though, that it wasn’t really an outlier. The BLS just needed to get enough data for the revisions.

What this means for the economy is pretty clear: whatever GDP number we get, likely something with a 1%, is probably an accurate reflection of how the economy fared in the first quarter. It may pick up from here, it ought to, but as with last year, the economy never really got up to speed after a lousy first quarter.

What this means for the Fed is another question.

The economy added an average 197,000 jobs in the first three months of 2015, the weakest pace since early 2014. Last year, the U.S. added an average 260,000 jobs a month. The first quarter of 2015 looks a lot like the first quarter of 2014, when job growth averaged 193,000. The big question is whether the latest slowdown represents broader weakness or a temporary lull. Last year’s weak first quarter was followed by a strong rebound. 

What a miss. Stock futures did not like the report, nor did bond yields, nor did the U.S. dollar as it provides further evidence that suggests the economy is slowing. 

S&P futures fell about 10 points, the U.S. 10-year Treasury yield is at its lowest level in two months and the dollar is off about 1% from the previous day.

Average hourly earnings rose 7 cents in March from February, to $24.86. They were up 2.1% from a year ago, and that’s about where they’ve been for a while now.

The average workweek slipped by 0.1 hour to 34.5 hours.

As dour as the establishment survey was with job growth of 126,000 the household survey (on which the unemployment rate is based) saw a gain of just 34,000. However, the joblessness percentage didn’t increase as the amount of unemployed fell 130,000 in March as the number of people not in the workforce rose 277,000 and those in it fell 96,000. As such, the labor-force participation rate tied the cycle low of 62.7%, which was first reached in September and is the lowest level since the 1970s

With Comex floor and electronic gold trading shut until Sunday night, gold bugs are watching from the sidelines as the dollar plummets and Treasurys rally in response to the disappointing US jobs report. The data show jobs growth slowed dramatically in March, which posted the smallest gain since December 2013. For gold traders, this fuels hopes that the Fed will delay raising interest rates, prolonging the low-rate environment that supports gold prices. Still, futures must wait some 2 1/2 days react.

126,000 jobs is well below the “psychologically” important threshold of 200,000. Some Fed officials have set a 200,000-a-month pace as a benchmark that satisfies them the job market is improving. With downward revisions to February and January, the pace of jobs growth averaged 197,000 in the first three months of 2015 – also below the psychologically significant level.

The mining and logging industry shed 11,000 jobs in March and has lost a total of 30,000 positions this year. That reflects weakness in the energy industry, suffering under a collapse in oil prices. But many service-providing sectors added jobs last month, including retail, health care and restaurants.

There’s more in our March Jobs Report By the Numbers.

The average hourly wage increased 0.3% in March, better than expected. Yearly pace is still a modest 2.1%, but a string of 0.3% pay raises will change that. Faster wage growth will be a sign that labor markets are tightening up, something the Fed wants to see before making its first rate increase.

The labor force participation rate remained at its multi-decade lows, coming in at 62.7% in March. This is a measure of everybody who could be in the work force, who is in the work force, and the fact that it’s so low says that there remains a sizable chunk of the labor force that simply isn’t working or looking for work.

The BLS noted that the participation rate over the past year has remained in a band between 62.7% and 62.9%. In essence, it hasn’t moved in a year, meaning that despite the superlative-laden headline numbers we’ve been seeing over the past year, not many people are being lured back into the labor force.

The number of people who fit the category “employed part-time for economic reasons,” meaning people who would work full-time if they could find full-time work, was flat at 6.7 million, the BLS said.

All of which makes us wonder what people are looking at when they talk about the labor force getting tighter.

This downshift isn’t the end of the world. At least we’re not looking at a negative quarter. Just disappointing. Again.

— Phil Izzo (@philizzo) April 3, 2015

At the Fed’s last policy meeting, officials lowered their estimate of the likely range of full employment to 5.2%-5%, effectively pushing farther down the road the level of job growth that will start pushing inflation higher. So how long will it take to get there? The Atlanta Fed helps chart that path via its jobs calculator. All else equal, it will now take a year of around 150,000-a-month job gains to get to 5.2%. That’s below the average monthly job gain performance seen over recent months, but it’s also a number that gains additional meaning in light of the March job rise coming at just 126,000. The number arrives during a soft start to the year and mounting evidence that 1Q booked little growth. If job growth is slowing, it could make it harder for wage pressures to rise, and that could reduce officials’ confidence about getting price pressures back on target.

Economist Adrian Miller says the economy is better than the jobs report suggests:

“I question the accuracy of the Mar BLS data as the economy and labor market is better than +126k. Data possibly skewed by stronger dollar, (shaving hiring by large companies), energy sector layoffs, and weather. Yet, within the household survey those workers unable to work due to bad weather in march was 182k, much lower than Feb 328K. So not sue how much weather played a roll. BLS data has a tendency to be very volatile and mostly subject to upside revisions.”

It’s not just doom and gloom about one jobs report, but also learning that the good news from the previous two was overstated.

— Justin Wolfers (@JustinWolfers) April 3, 2015

I keep coming back to what Janet Yellen said in her speech last Friday. “If underlying conditions had truly returned to normal, the economy should be booming,” she said. If we were going to complete the “if, then” construction, the second half of that statement should be, “then it must be that underlying conditions have not returned to normal, because the economy is not booming.”

Now, you don’t want to make too much of this. Remember, this is one month’s number, and even if the trend over the past three months has come down with the revisions, it’s still around 200,000, which is not awful. But when you plug these latest jobs numbers in with all the other economic numbers, you see a pretty creaky economy.

Maybe it gets better in the second and third quarters, like last year. But you’ve got to think the past three months have given some Fed officials, and maybe more than some, a lot to think about in terms of starting this whole rate-hike regime. Because if this what we’re getting with rates on an unprecedented, six-years-plus, 0% spree, what’s the economy going to look like if they start raising rates?

The dollar is falling sharply against the yen and euro. U.S. employment numbers had mostly stood out against otherwise lackluster economic numbers for 1Q, which have fueled doubts among investors for higher interest rates by midyear. Expectations now likely move back toward the end of 2015. The dollar drops against the Japanese currency to Y118.88, from Y119.71 ahead of the numbers, down 0.7% for the session. The euro soars to $1.1005 from $1.0870 beforehand, up 1.1% on the day.

It’s surprising to see the futures market down so much, given the implications of this report for Fed policy. The market can practically write off a June hike, BTIG’s Dan Greenhaus said, and even a September hike looks less likely.

In a note, he wrote, “with regards to the economy, a poor jobs report, while a surprise relative to consensus, is not a surprise given the weak economic data prints we’ve seen of late (Q1 GDP less than 1%?). With regards to the Fed, the price action tells us all we need to know. The odds of a June rate hike, already diminished, will probably move even lower (with the caveat that the Fed follows trends and not any one, single data point) and while we remain of the belief that the first hike comes in September, those odds of that happening have to be lower as well.”

Wages show modest improvement, but that is not enough to lift stock futures, bond yields nor the U.S. dollar. Fed Chair Yellen has said she doesn’t need to see a pickup in wages before deciding to raise rates, but that she would be uncomfortable moving if she sees indications that wages are decelerating. As WSJ’s Jon Hilsenrath wrote in Friday’s Grand Central, an increase from the 2% average hourly earnings pace moves the Fed toward rate increases and a drop from that pace makes the Fed hold off.

#Nonfarmpayrolls losses due to #lowoilprices, work stoppages at ports. #Strongdollar headwind will slow manufacturing recovery

— Diane Swonk (@DianeSwonk) April 3, 2015

Today’s disappointing U.S. jobs data is sweet music to gold bulls, but with metals trading closed for Good Friday “you can’t even do anything!” says RJO Futures’ Bob Haberkorn. Weaker-than-expected jobs growth in March and downward revisions to earlier jobs reports point to a lackluster labor market and make it unlikely that the Fed will raise rates by June, Mr. Haberkorn says.

“This number should be very supportive of gold when it opens on Sunday night, if gold was open today you would’ve seen a pretty substantial move to the upside on this number,” he says.

So, who did hire in March? Professional and business services, a broad category that includes everything from architects to temps, added 40,000. This group’s average over the first quarter was 35,000 per month, below the 59,000/month it was adding in 2014.

Healthcare added 22,000, with 19,000 of that coming in ambulatory health-care services.

Retail added 26,000, in line with its 12-month average.

Food services and drinking places added 9,000.

“What this means for the Fed is certainly complicated in that the labor market is still showing signs of tightening as the supply of labor continues to shrink as seen in the participation rate.,” commented Peter Boockvar, chief market analyst at The Lindsey Group.

“The Fed is left with a mediocre economy and with a labor market that is on the cusp of more substantive wage gains because the labor market is tight and productivity is punk. It’s a very tough spot for them….”

BNP Paribas’s economic’s team puts out this comment on today’s weak jobs report:

“Today’s data indicate improvement in the labor market slowed in March, which raises the question of whether the soft patch in the data owes only to temporary factors. This report will likely keep the FOMC cautious for now. They will likely need to see further evidence of a slowdown in hiring before moving away from their baseline forecast. “

John Silva, chief economist at Wells Fargo, says the disappointing read – the worst since December 2013 – gives stronger support for a September liftoff in rates. He adds the downward revisions to prior months corroborate his view that first quarter GDP growth expanded at 0.9%. 

Camilla Sutton, the chief FX strategist over at Sotiabank, writes:

“This will push out Fed expectations further and will increase fears that the U.S. economy has slowed far more than expected. Accordingly it should drive significant USD weakness. The shift higher in wages is encouraging but with the negative headline it is hard to focus on this small uptick in wages.”

Jobs loser: logging, mining. Winner: arts, entertainment http://t.co/o7r2ItJfZX pic.twitter.com/r9yn4dZ10C

— Becky Bowers (@beckybowers) April 3, 2015

Track the number of sectors gaining or losing jobs each month–and other unemployment data–in our interactive feature here.

Elise Gould, senior economist at the Economic Policy Institute, thinks it is too early to sound the alarm on the strength of the labor market. But, she says, policymakers should be wary of any signs of a slowdown from the solid job growth over the previous year. 

“Wages need to grow faster, and for a longer time, before we can say the economy is truly working for working people,” Ms. Gould added. “This coupled with a few months of disappointing jobs growth mean that the Federal Reserve should not be thinking about tapping the brakes any time soon.”

Nothing is really off the table for the Fed because there’s still two jobs reports before they even set the table for the June meeting

— Josh Zumbrun (@JoshZumbrun) April 3, 2015

Forgot to mention earlier, the employment to population ratio, a measure of the entire work force as a percentage of the entire population, was at 59.3% in March, unchanged for the third month, and slightly above the 59.0% of a year ago.

What’s that mean?

Of the 250 million people in the civilian noninstitutional population (i.e., people who aren’t in jail, old-age homes,  or the military), 148.3 million are in the work force. 8.5 million are officially unemployed. 93.2 million are not in the labor force. Another 6.4 million fall into the category “persons who currently want a job.”

So, of all the people who could be working and adding to the economy, roughly 150 million are, and 100 million aren’t. Now, we’re not in the maker/taker camp on this. We’re not writing this to call out the people whoa ren’t working. It’s not like that number drops to zero in boom times. During the dot-com boom days, the ratio was around 65%, so you still had tens of millions of people not working, for a variety of reasons.

All we are trying to say is that it is going to be very hard to get this economy moving under its own sustainable strength when you have that many people not working. If we used the dot-com days ratio of 65%, we’d have roughly 163 million people working.

Would an extra 15 million workers be enough to tip the scales? Maybe.

When Sean Lynch, co-head of global equity strategy at Wells Fargo Investment Institute, saw the disappointing March jobs number this morning, he said he expected US stock futures to be up a bit. Positive job creation and wage inflation reports have sent equities lower at times as investors feared it would prompt the Fed to accelerate plans to raise rates, while weak reports caused cheer that the Fed may keep easy policy around longer. Not this time–on the heels of the lackluster report stock futures turned negative.

“Investors are starting to worry,” Lynch says. “If you compound the weaker jobs number with earnings starting next week that may not come in as robust as the past few quarters, in this case bad news could be bad news.”

Okay, everybody, call the open!

Oh, yeah. Forget about that.

Stock futures closed at 9:15 a.m. EDT, ending down 20 points on the session. Futures were about flat going in the payrolls report, but fell off when the numbers hit amid concerns about the strength of the economy. The labor market had been flashing signs of significant strength while other economic reports were pointing to underlying weakness. March’s poor jobs report adds to evidence overall growth slowed in the first quarter.

Okay, we’re going to close the live blog down a bit early this go-round, seeing as the stock market’s closed as well. We’ll just have to wait until Monday to get the full market reaction. It’ll be interesting to see if mulling the numbers over the long weekend changes anybody’s minds about what it all means.

Everybody have a great Passover and Easter, have a nice, relaxing weekend, and we’ll pick it all up again on Monday.