The March jobs report was a big disappointment - and there's probably more to come

REUTERS/Pablo Sanchez

It showed the US economy added just 126,000 jobs in March, whereas the consensus forecast was for a gain of 245,000. The unemployment rate was unchanged at 5.5%.

It was the biggest miss in payrolls since December 2009, and broke a streak of 12 straight months of job gains over 200,000.

Deutsche Bank's Joseph LaVorgna says there's more weakness to come.

LaVorgna also linked to a research report from last week. Here's an excerpt:

Even in relatively strong years for hiring, there are typically pockets of payroll weakness. This could be due to payback from an usually large employment increase in the previous month, inclement weather such as snowstorms or hurricanes, faulty seasonal factors-remember the employment data are prone to large upward revisions-or periodic work stoppages such as labor strikes.

He also recalled two years of strong payrolls growth - 1999 and 1978 - when the gains were unusually weak in at least three months. But what tends to happen after these weak months, LaVorgna wrote, is that everyone suddenly becomes too pessimistic.

On Friday, the market reaction was swift and clear: Stock futures cratered, the dollar tanked and bonds surged.

Even the Fed, which is now hinging its rate-hiking decisions on economic data, may get cold feet, LaVorgna wrote, though he still expects the Fed will raise rates in September.

And in the wake of any weak reports, here's what the Fed, and markets, should be focusing on, according to LaVorgna:

Provided that the four-week moving average on jobless claims remains below 300k, and employee tax receipts continue to grow between 5-6%, financial markets and the Fed should look past the transitory weakness in hiring that will occur at some point this year.