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Mark O' Donnell
 · 
Research Analyst
March 30, 2021
 · 

Have stimulus checks hampered March job creation?

US Non Farm Payroll: Will stimulus checks stop people seeking jobs?

The Non Farm Payroll report detailing the number of jobs added to the US economy in March is released this Friday, 8.30 am (EDT). The FED is projecting an optimistic 680K new jobs, while the market consensus is that the payroll will report in at 655K. For context, the payroll value for the preceding month came in at 379K. Since February, the US economy has opened up a lot, explaining the considerable jump in the payroll value.

The US Non Farm Payroll is an important event on the economic calendar, and market makers around the world will be watching the announcement with a sharp eye.

US non

What happens if the payroll number comes in lower than projected?

This is an important question. The market doesn’t appreciate unpredictability, and a hint of weakness in the US economy could lead to some sharp corrections.

The Russell 2000 index has been on a tear for the past year, and a correction could be imminent. A poor March payroll value could be the catalyst for the correction event. Small to medium enterprises make up a decent portion of the US economy (over 50% last time I checked). The Russell 2000 is an index comprised of small to medium enterprises. Thus, the health of this sector is under intense scrutiny when payroll numbers are released. With such phenomenal success in the past year (up ~98%), the index is begging for something to slow it down.

What might cause a low payroll value?

Perhaps the US economy is not as resilient as the market thinks. Or maybe, and here I would like to posit a question: Might the stimulus checks dissuade the unemployed to seek work? It is not a crazy assumption, a little “right-wing” for my taste, but entirely unfathomable. It could be argued that a portion of those unemployed in the previous month have less incentive to find work when the government is providing Covid relief checks.

Mix in the possibility of the White House sending out another round of stimulus checks, and the impetus to find work is further diminished.

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