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What a way to kick off the month as the Non-Farm Payrolls report is coming in! Seeing how the ADP non-farm employment change released yesterday was off target, what should we expect in tomorrow’s report?

Looks like our good buddies at the US Bureau of Labor are boldly predicting that there was an increase in jobs hiring this March. I say BOLDLY because the consensus is that 179,000 jobs were added to the economy!

Can we really expect such a fabulous figure? Given the recent trend… Maybe, just maybe! The past few months have shown some encouraging signs as job cuts have steadily been decreasing. Last January, only 36,000 people lost their jobs, which actually beat initial forecasts of a decline of 56,000 in payrolls.

Let’s take a look at whether or not recent data supports the prediction…

The ADP’s version of the non-farm employment tally suggests that there could have been a drop in the official and actual employment figures for March. Based on the ADP estimate, about 23,000 jobs were unexpectedly cut this month. Apparently, many US firms remained hesitant in hiring more workers given the stagnant business activity.

Frail personal spending and income figures also suggest a probable dip in employment this month. Personal spending only grew by 0.3% which was weaker than the 0.4% estimate. Personal spending, on the other hand, was flat at 0.0%. How can firms add more workers if people aren’t spending? While one of the reasons why business activity dipped in January and February was because of adverse winter conditions, it shouldn’t be an issue this time around since it’s already spring! People could already be filling their closets with the new Spring Collection!

In any case, even if the March NFP reading provides a ray of sunshine for the US labor market, analysts say that a positive reading wouldn’t be enough to nudge the 9.7% unemployment rate lower. The improved trend in hiring could encourage those who are no longer looking for work to go back in the labor force, adding to the pool of unemployed. In effect, the increase in hiring could be offset by an even larger increase in the number of people hunting for jobs.

Besides, it will probably take a long while, maybe a few more months to a year, before the overall jobs climate improves. After all, the US shed around 8.4 million jobs since the onset of the global recession, pushing its unemployment rate to 10% late last year. Although the unemployment rate dipped to 9.7% in February and hasn’t climbed since, Big Ben Bernanke has warned that the labor situation remains weak and that it warrants a long period of low interest rates.

Still, the gaining momentum of risk appetite could put a toll on the dollar once the NFP report comes out. In fact, the run in risk appetite was so strong that it was able to weather the news that Iceland’s credit sovereign rating was downgraded!

It looks like the highly overbought dollar is also falling easily on bad economic news. Just yesterday, the dollar received a major beating from the euro and the pound when worse-than-expected results of the ADP non-farm employment change and Chicago PMI came out. Could this be the sign of a new trend? Has the dollar’s domination over the European currencies finally come to an end? Will it be a good Friday for the dollar? We’ll just have to wait and see.