Companies Hire Fewer in March as Service Sector Growth Slows

Wednesday, 03 Apr 2013 11:45 AM


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U.S. companies hired at the slowest pace in five months in March as recent strong demand for construction jobs evaporated, but separate data on Wednesday showed the pace of growth in the vast U.S. services sector slowed last month.

The ADP National Employment Report said private employers added 158,000 jobs last month, falling short of economists' expectations for an additional 200,000. The report came in below the lowest estimates in a poll by Reuters and was the smallest gain since October.

Revisions to February's jobs gains were more positive, with the private payrolls figure raised to an increase of 237,000 from the previously reported 198,000, although January was revised down to 177,000 from 215,000.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

March's pullback was largely due to construction job growth slowing after showing strength in recent months, said Mark Zandi, chief economist for Moody's Analytics. There were zero new construction jobs in March.

Recent monthly gains in the construction sector have averaged about 35,000, Zandi said, as the housing recovery has gained traction. Hiring may also have been boosted in the short-term by rebuilding efforts following the massive storm that hit the U.S. northeast in the fall of last year, he said.

"If that's the case, underlying job growth is not changed appreciably," said Zandi, estimating overall employment growth is running at around 175,000 a month.

The ADP report, which is jointly developed with Moody's Analytics, comes ahead of the government's more comprehensive labor market report due on Friday.

Economists said the ADP report could add some downside risk to their forecasts for Friday's number, though ADP is not always accurate in predicting the outcome.


Upbeat data in recent months, including on the labor market, has suggested the economy picked up in the first quarter after growing at a weak 0.4 percent in the fourth quarter of last year.

"We are in a better place than last year, but we are stuck in the same place — about 2 to 3 percent growth. In general the trend is not moving very fast," said Stephen Stanley, chief economist at Pierpont Securities in Stamford, Connecticut.

Separate data on Wednesday showed the pace of growth in the vast U.S. services sector slowed in March to the lowest level in seven months as new orders and employment measures pulled back.

The Institute for Supply Management said its services index fell to 54.4 last month from 56 in February, falling short of economists' forecasts for 55.8. It was the weakest reading since August.

The forward-looking new orders index slipped to 54.6 from 58.2, while employment dropped to its lowest level since November at 53.3 from 57.2.

Still, the service sector has been more resilient than its manufacturing counterpart and has held above the 50 level on the index that indicates expansion since the beginning of 2010.

The day's data pulled U.S. stock prices lower, though the S&P500 stock index remained within striking distance of an all-time intraday high. The U.S. dollar extended losses against the euro immediately following the ISM report, while Treasurys prices added to gains.

Friday's employment report, which includes both public and private sector employment, is expected to show a gain in overall nonfarm payrolls of 200,000 last month, while the unemployment rate is seen holding steady at 7.7 percent.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

© 2014 Thomson/Reuters. All rights reserved.

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