Private sector hiring missed the mark by a lot in March, according to ADP’s latest jobs report.
What is the ADP Jobs Report?
The ADP jobs report is a monthly report that shows how many jobs were added or lost in the private sector of the US economy. It’s published by the payroll processing firm ADP and is considered a precursor to the more comprehensive nonfarm payrolls report from the US Labor Department. The report includes data on job growth by industry and company size and can provide insights into the health of the economy.
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March ADP Jobs Report: 145K vs 210K est. (vs 261K in February)
Only 145,000 new jobs were added, which is below the estimated 210,000, and a significant drop from February’s 261,000.
What drove the drop? The decline in hiring was driven by losses in financial activities, and the professional & business service sector. Despite the broad hiring slowdown, leisure & hospitality (+98K), trade transportation & utilities (+56K), and construction (+53K) all saw reasonable gains.
Overall, Q1 averaged 175,000 jobs per month versus 397,000 per month in the first quarter of last year. ADP’s chief economist Nela Richardson noted that the data signals that the economy is slowing, as employers pull back from a year of strong hiring.
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Although this news isn’t good for the economy (no one likes rooting for a slowdown), this is exactly the type of news that the Fed wants to hear. The Fed has consistently noted that hiring has been the sticking point of inflation, while many goods and services have broadly fallen, and have stuck to their word when it comes to raising rates “until the job is done.”
With this report firmly indicating a slowing economy and a softening labor market, it is possible for the Fed not to raise rates at the next meeting. However, it’ll take more than just the ADP Report for that to happen.
On Good Friday the nonfarm payrolls report from the Labor Department will be released. This is arguably more important than the ADP, and while weak job growth could spell trouble for the economy, it would likely be welcomed by the stock market and certainly by the Fed.
As it stands, the economists surveyed by Dow Jones expect payroll growth of 238,000 in March and an unemployment rate that holds exactly where it is now, at 3.6%.