It seems that we are conditioned for a disappointing jobs report tomorrow. Although the ADP report came in strong, we have mixed signals from the employment components of the ISM reports, with the employment index up in manufacturing but down in the much bigger service sector. In addition, weather may be a factor - did warm weather goose the January and February numbers and now we will see payback due to a cold March? I expect that the Fed will be expecting the latter. The minutes suggest they are already primed for weaker first quarter numbers to begin with:
Participants generally saw the incoming economic information as consistent, overall, with their expectations and indicated that their views about the economic outlook had changed little since the January-February FOMC meeting. Although GDP appeared to be expanding relatively slowly in the current quarter, that development seemed primarily to reflect temporary factors, possibly including residual seasonality.
They would probably write off a weak headline payrolls numbers as a reflection of just another temporary factor. Of course, that also means they will embrace a solid number. It's kind of a heads they win, tails you lose situation for the Fed.
Consensus is looking for 175k on the payrolls in a range of 125k to 202k. This sounds reasonable; my estimate is 190k within a wider range of 106k to 275k:
Variance on these estimates, however, is notoriously high. My inclination is to expect the actual print to be more likely below and above 190k.
Assuming a weak read of payrolls that is written off to weather, the rest of the report is more important. The Fed maintains a laser sharp focus on signs unemployment is significantly undershooting the natural rate. Consensus expects the rate to hold at 4.7%. A drop would raise eyebrows at the Fed. An increase in the participation rate, however, would be welcome news that they can maintain a gradual pace of tightening. And wages of course will help guide them as they assess their distance from the natural rate.
Bottom Line: Unless the report is a complete disaster, I would expect the Fed is poised to look though any weakness. But that means a strong report will grab their attention.