By Ian McKendry

WASHINGTON (MNI) – The markets will be closely watching Friday’s
non-farm payrolls number for April and one of the questions economists
are asking themselves is, how big of an impact did the weather have on
the first quarter?

“I think the big question really is twofold, one is, to what degree
has the weather distorted the numbers the last two months, the other is,
are the fundamentals deteriorating,” Stephen Stanley, chief economist at
Pierpont Securities told MNI.

After averaging more than 250,000 job gains in January and
February, the US economy got a splash of cold water with a disappointing
120,000 job gain in March.

Federal Reserve Chairman Ben Bernanke told reporters during a press
conference following the Fed’s April policy statement that weather
likely distorted the jobs numbers in the first quarter and it is more
likely that jobs are growing at a 150,000 to 200,000 pace.

“The weather has probably affected a number of things, it probably
brought forward some of the hiring so that it made January and February
artificially strong and March artificially weak,” Bernanke said.

According to the median forecasts of an MNI survey, economists are
looking for a 165,000 non-farm payroll gain with 170,000 private payroll
jobs added and an unemployment rate of 8.2%.

It is worth noting though, that the median forecast has overshot
the actual headline April non-farm payroll number the last four years by
an average of 74,000 — although, extended out over twenty years, the
average miss is almost zero.

Another factor that could contribute to making the April non-farm
payroll report difficult to forecast is seasonal adjustment issues.

This year, there were four weeks in between the March and April
survey week, as opposed to previous years when there were five weeks.

In 2011, the BLS non-farm payroll seasonal adjustment accounted for
about one million jobs — the last time there were four weeks in between
survey weeks was 2007 and the adjustment was closer to 800,000.

RBC Chief Economist Tom Porcelli said the ADP employment report
which measures private payroll jobs has also had a difficult time
forecasting the April non-farm payroll report.

“We did not adjust our numbers after ADP and we sort of make that a
rule because it has a fairly spotty track record in terms of forecasting
payrolls,” Porcelli told MNI, adding that ADP has missed the April
non-farm payrolls number by about an average of 100,000 jobs.

Porcelli, who is forecasting a 160,000 gain for both non-farm
payrolls and private payrolls, said he is expecting gains in
manufacturing employment while government remains flat.

“Job losses in the government sector are starting to go away,”
Porcelli said.

First Trust Advisors on the other hand does use the ADP report in
their forecasting model and revised down their payroll expectation after
the report printed a weaker than expected 119,000 job gain Wednesday
morning.

“We are probably going to see slightly lower numbers than we
expected,” Strider Elass, economic analyst at First Trust Advisors, told
MNI.

“We think some of it might be a payback from the warmer weather,”
Elass added.

A big factor of course is how the Fed judges the strength of the
April report.

“We’ll continue to be watching the labor market, that’s a very
important consideration,” Bernanke said during the April press
conference, adding that he thinks policy is in the right place for now,
but the Fed is prepared to take more action if the economy deteriorates.

Stanley at Pierpont, who is forecasting 190,000 job gains, said he
thinks the Fed is likely to stand pat, and not make any additional asset
purchases for now.

“I think at this point, the bar has been raised pretty high in
terms of what it would take to get another round of QE or an extension
of twist or any of those things,” Stanley said.

Mesirow Financial Deputy Chief Economist Adolfo Laurenti expressed
similar sentiment in a conversation with MNI.

Laurenti, who is forecasting 120,000 non-farm payroll jobs added in
April, said “I think QE3 has always been and will remain on the table —
probably not yet as long as we see progress of some form.”

“I think 120,000 would be a disappointment but not enough to
trigger action,” added.

However, Laurenti said if the next three of four payroll reports
are disappointing and the unemployment rate starts to rise, “we may see
additional action” by June or July.

The Employment Situation for April will be released at 8:30 a.m. ET
Friday by the Bureau of Labor Statistics.

** MNI Washington Bureau: 202-371-2121 **

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