KEY DATA: Trends Index: -1.06 points; Orders: -1.7%; Durables: -3%

IN A NUTSHELL: “Job gains have been holding up but unless growth improves, the monthly payroll increases could slow as we move toward the summer.”

WHAT IT MEANS: With Fed Chair Yellen focusing more on wage pressures rather than the domestic economy, which she thinks is good, the labor market data are the ones to watch. The Conference Board’s Employment Trends Index eased in March after a smaller decline in February. The year-over-year increase has slowed markedly in the last six months and since this is a forward-looking indicator, it is pointing to slower job gains ahead. That should not come as a surprise, as the sluggish growth over the past six months didn’t put as much of a damper on hiring as would be expected. Ultimately, either growth has to accelerate or payroll increases are likely to decelerate.

One sector where jobs have been hemorrhaging is manufacturing and there still isn’t any really good news that would point to a recovery. Factory orders fell in February as durable goods demand was off even more than the preliminary estimate. Nondurable goods orders were also down, but more modestly. Most of the decline in factory orders came from slippage in two sectors, mining and aircraft. We can gloss over the aircraft cut backs, as they are hugely volatile and don’t create much near-term impacts. The oil-sector, though, continues to restrain overall economic growth.

MARKETS AND FED POLICY IMPLICATIONS: While the Conference Board’s Employment Trends Index moderation is a warning sign that hiring could ease, it is not yet signaling a major downturn in job gains and clearly not a drop in total employment. But any easing in job creation would slow the decline in the unemployment rate, especially given the recent rise in the participation rate. That would provide Chair Yellen with more ammo as she defends her “slow as she goes” rate hike policy. But too much is being made of the monthly data on wages. They can be biased by changes in the distribution of jobs and not reflect what is actually happening. It’s simple math: If there lots of jobs being created in the relatively lower paying retail and hospitality industries but losses in the relatively higher paying manufacturing and energy sectors, the weighted average would go down – or the rise would be restrained. But that is just a distributional issue. Let’s see what other, better measures, such as the first quarter Employment Cost and the Productivity and Costs reports say when they are released at the end of the month and early May. Until then, Chair Yellen has a strong argument that wage pressures are modest and are indicating there still is slack in the labor markets, as she fights against those at the Fed who want to raise rates sooner and more rapidly than she does.