Payroll processor ADP released a report on Wednesday showing much weaker than expected private sector job growth in the month of March.
ADP said private sector employment rose by 129,000 jobs in March after jumping by an upwardly revised 197,000 jobs in February.
Economists had expected employment to increase by 170,000 jobs compared to the addition of 183,000 jobs originally reported for the previous month.
“March posted the slowest employment increase in 18 months,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Although some service sectors showed continued strength, we saw weakness in the goods producing sector.”
The report said employment in the service-providing sector increased by 135,000 jobs, while employment in the goods-producing sector fell by 6,000 jobs.
While employment at mid-sized and large businesses rose by 63,000 jobs and 60,000 jobs, respectively, employment at small businesses edged up by 6,000 jobs.
“The job market is weakening, with employment gains slowing significantly across most industries and company sizes,” said Mark Zandi, chief economist of Moody’s Analytics.
“Businesses are hiring cautiously as the economy is struggling with fading fiscal stimulus, the trade uncertainty, and the lagged impact of Fed tightening,” he added. “If employment growth weakens much further, unemployment will begin to rise.”
On Friday, the Labor Department is scheduled to release its more closely watched monthly employment report, which includes both public and private sector jobs,
Employment is expected to jump by 180,000 jobs in March after inching up by just 20,000 jobs in February, while the unemployment rate is expected to hold at 3.8 percent.
ADP and NFP
The ADP payroll report is the precursor to the Labor Department’s Employment Situation Report, colloquially known as Non-Farm Payrolls or just NFP which will be issued this Friday at 8:30 am EDT, 12:30 GMT.
This report provides a detailed analysis of the US labor market beginning with statistics on total US payrolls and additions. It separates the jobs numbers into myriad categories–private and government payrolls, type of employment, age, racial and gender differentiated unemployment rates and many others. The Bureau of Economic Analysis (BEA), a division of the Labor Department, tracks average hourly earnings monthly and annually, average work week (hours) and the labor force participation rate. The report gives the most comprehensive picture of the US labor market and is the best known and most widely traded US economic statistic.
There is a directional correlation between the private ADP figures and the overall US employment numbers. The two numbers generally move in the same direction each month though the amount of the rise or fall is not well correlated.
The February report was a good example. Non-farm payrolls dropped from 311,000 in January to 20,000 in February and ADP fell from 300,000 to 183,000.
ADP and NFP: Difference in degree
The report from ADP, released two days before the BEA statistics each month is a useful guide to the Labor Department numbers for the overall economy.
The main difference between the two reports is that ADP records just the hiring of its own clients, 411,000 US firms employing nearly 24 million workers. The BEA covers the entire US economy.
The BEA receives reports on actual hiring each month by firms of all sizes nationwide. It also estimates the number of jobs created by newly formed small businesses which are the largest source of employment growth. These positions have not yet been reported to the government. The government periodically adjusts the estimated number of positons by the actual figures resulting in annual revisions to the payroll numbers.
The BEA also includes government hiring and firing at the local, state and Federal level.