Private-sector job creation last month slowed more than economists predicted, according to this morning’s release of the ADP Employment Report. The crowd was looking for a monthly rise of 230,000, according to Econoday.com’s consensus forecast. Instead, US companies hired a relatively soft 189,000 workers in March. The latest numbers pour cold water on the idea that the US economy is accelerating, although the year-over-year trend is still strong enough to support the outlook for moderate growth.
“March job gains came in under 200,000 for the first time since January of last year,” said Carlos Rodriguez, ADP’s president and chief executive officer. “The decline was centered in the largest companies, those with 1000 or more employees.”
It’s unclear if the weaker growth rate in March is noise or a sign of more trouble down the road. Meantime, it’s worth pointing out that the annual pace is still relatively robust, with payrolls advancing close to a 2.5% rate. But as you can see from the chart below, growth has decelerated for two straight months via year-over-year changes. It’s premature to assume the worst, although today’s release implies that Friday’s official payrolls report from Washington will be softer vs. the advances posted in recent months.
The government’s estimate of private-sector payrolls has been unusually strong in year-over-year terms. In the February report, US companies added jobs at a pace that translates into a sizzling 2.8% rate. But that potent gain will surely decelerate in Friday’s release.
Even so, today’s update is hardly a tragedy. The US labor market continues to grow, albeit at a rate that’s moderately slower vs. the last several months. The main casualty is the outlook for a materially stronger phase of economic growth. Disappointing? Yes, but only from the perspective of heightened expectations for something better.
The bigger test will come next month, when we see April’s data. If the deceleration continues, it may be time to manage expectations down another notch or two. But first, let’s see how Friday’s jobs data from the Labor Department compares. Analysts are looking for a substantial slowdown, with private-sector jobs rising 240,000 in March, according to Econoday.com’s survey data–down from February’s hefty 288,000 advance.