--ADP reports only 158,000 private sector jobs created in March,
below expectations
--Construction payrolls were flat last month, ADP says
--Weak ADP report may temper expectations for Friday's payroll
number
(updates with comments from economist starting in fourth
paragraph)
By Kathleen Madigan
Private businesses in March added far fewer employees than
expected by economists, led by weakness in the construction sector,
according to a tally of private-sector hiring released Wednesday.
The undershoot may temper investor expectations for government
payrolls data to be reported Friday.
Private-sector jobs in the U.S. increased by 158,000 last month,
according to a national employment report calculated by payroll
processor Automatic Data Processing Inc. (ADP) and forecasting firm
Moody's Analytics.
Economists surveyed by Dow Jones Newswires expected ADP to
report a gain of 192,000 private jobs. However, the February job
gain was revised up significantly, to 237,000 from 198,000 reported
a month ago.
Mark Zandi, chief economist at Moody's Analytics, which compiles
the ADP report, said that ignoring monthly volatility, the U.S.
labor markets probably are creating about 175,000 jobs a month.
He warned, however, that the impacts from the federal sequester
and other budget cuts could slow hiring down to about 125,000 in
the summer.
Mr. Zandi said that except for construction, job gains were
evident among industries and company size.
According to ADP, firms employing one to 49 workers increased
jobs by 74,000 in March. Medium-sized businesses with payrolls of
50 to 499 workers hired 37,000 new employees. Large firms,
businesses with 500 or more employees, added 47,000 positions.
Service-sector jobs increased by 151,000 in March, and factory
jobs filled 6,000 positions.
One anomaly of the ADP report was no change in March
construction payrolls despite other data showing a rebound in home
building in the first quarter.
Mr. Zandi said the flat reading followed an average gain of
35,000 jobs during the previous four months, when rebuilding
activity surged in areas hit by superstorm Sandy.
Economists at J.P. Morgan Chase, however, said state-level data
reported by the Labor Department show large gains in construction
employment outside of the Sandy-affected areas. Consequently, J.P.
Morgan forecasters "look for continued strength in construction
payrolls through March as the housing market recovers."
ADP reports its tally of private-sector hiring ahead of the
Bureau of Labor Statistics' employment situation report. The BLS
report counts both private and government payroll slots.
Although the ADP report came in below expectations, past reports
have missed the payrolls number by a wide margin. Economists at
Credit Suisse point out that since ADP changed methodology in
October, the average miss (regardless of sign) between the
first-reported ADP and first-reported BLS private jobs has been
35,000.
Given the gap, most economists probably won't change their
forecasts significantly if at all after seeing the ADP report. The
median forecast of economists calls for nonfarm payrolls to
increase 200,000.
Investors, however, are focused on labor-market conditions to
divine the next policy move by the Federal Reserve. The
weaker-than-expected ADP report suggests the Fed is unlikely to
contemplate pulling back on accommodation anytime soon.
ADP, of Roseland, N.J., offers payroll processing, human
resource and benefit-administration services to about 600,000
clients world-wide. Economics firm Moody's Analytics is a
subsidiary of Moody's Corp. (MCO).
Two other job-related releases gave estimated job gains for
March, one close to the ADP number.
TrimTabs Investment Research projected only 156,000 jobs were
added in March. TrimTabs analyzes daily income tax deposits to the
U.S. Treasury to derive its jobs estimate.
TrimTabs said its gauge suggests the U.S. economy isn't creating
enough new jobs to bring down the unemployment rate.
On Tuesday, job-listing website Bright.com estimated 223,000 new
jobs were created in March.
"Although the sequester will marginally impact growth in
government-contract job markets, the overall labor market shows
signs of improvement month over month," the Bright.com report
said.
Write to Kathleen Madigan at kathleen.madigan@dowjones.com