The economy is expected to have added nearly a half million jobs in March and wage gains also likely picked up at a hotter pace.

Economists expect 490,000 payrolls were added, down from 678,000 in February, according to Dow Jones. The employment report, released at 8:30 a.m. ET Friday, is also expected to show the unemployment rate dipped to 3.7%, from 3.8%

The pace of wage gains is expected to increase to 0.4% over February or 5.5% year-over-year, Dow Jones found. In February, wages were flat on a monthly basis, but rose 5.3% year over year.

“The job market feels like it’s rip roaring,” said Mark Zandi, chief economist at Moody’s Analytics. “The job market is a machine. It’s been turning over a half million, give or take for a year… We can’t maintain this pace for very long or else we’re going to overheat.”

Zandi said he expects job gains to be made in the industries that have been most disrupted by the pandemic, like leisure and hospitality but also professional services.

 “Transportation still seems to be pretty hot, certainly the hospitality sector but over the last couple of months, it’s been pretty widespread. We’re seeing jobs gains across most of the jobs sectors,” said Marvin Loh, State Street senior global macro strategist. “I would look at retail because when you get these higher gas prices it’s the consumption categories that get hit first.”

Tom Gimbel, CEO of recruiting firm LaSalle Network, said he sees no sign from CEOs that the Ukraine war is changing their plans, and they are more worried about inflation and the labor shortage. But he did note the firm’s cybersecurity practice is up over 50% from a year ago. Sales and marketing are the hottest areas for hiring.

“There’s a huge surplus in response in people applying for openings,” Gimbel said. “What that’s telling me is people want to be working, and that’s a little bit of a different shift. People were going for more money and they were going for work from home.”

Gimbel said now companies are hiring for a hybrid structure, with employees still at home part-time but more often in the office. “We still have companies that are willing to pay for the experienced talent and the wages continue to increase…You’re getting people that are two-years experienced, and they’re getting what two or three years ago they would have gotten with five years’ experience,” he said. “We’re seeing out-of-college salaries really start to balloon.”

Gimbel said for instance, a young professional in consulting may have initially earned $55,000 to $60,000 several years ago, and now could see a salary offer of $75,000 to $90,000. “It’s just that companies are in such short supply of people to do the work,” he said.

In February, total nonfarm employment was still down 2.1 million, or 1.4% from its pre-pandemic level in February 2020. The participation rate was 62.3% in last month, down from 63.4% in February 2020.

Zandi said the economy still has room to create jobs before reaching full employment. The Federal Reserve has already determined the job market is strong enough for it to turn its focus on fighting inflation.

The Fed raised interest rates by a quarter point this month, its first hike since 2018, and economists are predicting it could ramp up the pace even more to a 50 basis point, or half-point increase in May. The Fed forecast the equivalent of seven quarter-point rate hikes for this year.

That makes the wage component of the employment report an important focus for markets that have been fixated on inflation.

“I’m expecting a 0.4% increase” in average hourly wages, said Diane Swonk, chief economist at Grant Thornton. “That will give us 5.5% on the year, which puts us back at January levels. They slowed a bit in February so we’ll see a reacceleration in wage growth.”

The hotter wages are filtering into inflation. The consumer price index jumped 7.9% in February and is expected to be high again in March.

“Even though wages are not going up as fast as inflation, there’s no question wage gains are adding to goods inflation and services inflation,” Swonk said. “We’re starting to see it show up in the service sector.”

Regardless of what is in the employment report, the Fed is expected to proceed with its interest rate hike in May.

“Clearly the Fed has already decided that we’re overheating,” said Swonk. “This is a remarkably fast gain in jobs, but it’s faster than the economy can accommodate. If everyone is running at the door at once, people get crushed.”

State Street’s Loh said the March jobs report is not likely to have much market impact.

“From a market perspective, unless it’s a massive surprise to the downside, it’s not going to have a big effect,” he said. “The jobs market is fully healed from the Fed’s perspective… They’ve already signaled that we’re at full employment from a monetary perspective.”

But Loh also said the jobs market could overheat if the participation rate doesn’t improve, meaning the amount of people actually working in the economy doesn’t expand.

“If we actually end up printing these kind of numbers without people coming back into the workforce, we could collapse that unemployment rate pretty quickly and that would be a sign of overheating,” he said.