Non-farm payrolls: What to watch in today's jobs report

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It's the final monthly employment report before the FOMC gathers for its upcoming March meeting. Consensus economist forecasts see a gain of 400K payroll additions last month, compared to the 467K gain in January, leaving employment only 2.5M jobs below its pre-pandemic level (those jobs losses are expected to be fully recouped this year). February's unemployment rate is also anticipated to fall 0.1 percentage points to 3.9%, while worker scarcity likely pushed up average hourly earnings by 0.5%, or 5.8% Y/Y. Stay tuned for the release of the report by the Labor Department at 8:30 a.m. ET.

Tough time: Payroll forecasts haven't exactly had a great track record over the past six months, with actual figures coming in at least 200K more or less than consensus estimates. Even today's payrolls projections range from as low as a 200K at Deutsche Bank to as high as a 730K jobs gain at Morgan Stanley. It's been hard to estimate the data during the pandemic, with shifts in seasonal patterns and distorted measurements, while collecting timely employment data has also been a problem.

With all the things going on in the world, a strong American labor market should provide some optimism about the economy. In mid-February, the U.S. even recorded the smallest number of people on state unemployment benefits since 1970, though it's important to note there are downside risks as well, especially if today's jobs number comes in softer than expected. An ISM survey on Thursday showed a measure of services sector employment contracting in February, manufacturing employment growth slowed last month, while "widespread strong demand for workers remained hampered by equally widespread reports of worker scarcity" according to the Fed's Beige Book on Wednesday.

Policy path forward: "I think because we saw [Fed Chair Jay] Powell say, uncharacteristically frankly, specifically say that the planned to support a 25-basis point hike, that speculative thinking may be a little bit more anchored at a 25-basis point hike even if we do see a stronger-than-expected report," said Lauren Goodwin, economist at New York Life Investments. "Even 5.8% wage growth is a wage cut if inflation is creeping up above 7%."