3 things to watch in Friday's jobs report

On Friday, we'll get the latest estimate of job growth from the government, and it's expected to be another solid report. Consensus estimates are that nonfarm employers added 247,000 jobs in March, according to Bloomberg News, with the unemployment rate holding steady at 5.5 percent. That would be slightly fewer than the prior month's 295,000 and just below the last 12 months' average payroll growth of around 275,000.

There are three key areas to watch in tomorrow's report, and they are the same job market indicators we have come to scrutinize closely in recent months:

1. Wages have in recent months become one of the most important indicators of labor-market health. With job growth now consistently well above 200,000 per month, the question is when all those new hires (and all that diminished slack in the labor market) will finally put upward pressure on wages. It's not just about paychecks, either; signs of higher inflation could spur the Fed to finally raise interest rates, which have been near zero percent since the end of 2008 (though Fed Chair Janet Yellen has recently said the central bank might not wait for wages to pick up). In January, private-sector wages picked up by a huge 13 cents per hour, but in February it was only around 3 cents.
2. The labor force participation rate has been more or less flat for nearly a year now. Right now, it shows that 62.8 percent of working-age Americans are in the labor force — that is, working or looking for work. This is down from a pre-recession high of 66.4 percent. As only Americans looking for work are considered unemployed, the labor force participation rate can help tell you if a drop in the unemployment rate is because people actually found work or if they simply stopped trying. A higher participation rate would be a sign that discouraged workers are ready to look for work again ... but economists disagree on how high it could go. Much of the recent decline is due not only to discouraged workers but to retiring baby boomers.
3. The number of involuntary part-time workers has fallen substantially since the recession, but it's still elevated. The are still around 2 million more of these workers than there were before the recession. This is one less obvious but still hugely important indicator of slack in the labor market, as it tells you something about who's underemployed, not just who's unemployed.

The economy has been getting a lot better

If you've been watching the job market closely, you know that those have been the indicators to watch for a while now. We've settled into a pattern of mostly good monthly jobs reports, with maybe one or two blemishes each month, in the form of lower labor-force participation or low wage growth, for example.

It can seem from month to month like the American job market is only barely inching back to health. But it's important to remember that it's dramatically better than just a year ago, when the labor-market recovery was just gaining new strength. The economy has now had 12 straight months with payroll growth over 200,000. The chart below gives a sense of just how strong this improvement has been.

Over the past 12 months, average monthly job growth has been at nearly 275,000. One year ago, it was 185,000. With any luck, March's payrolls figure will help to continue that strong trend.

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