According to payroll processor ADP, the U.S. private sector added around 145,000 jobs through the middle of last month. This is a sharp slowdown from February's figure of 261,000 and well below the estimated 200,000. These numbers indicate that the job market, which was red hot throughout last year, is now cooling rapidly. The report shows significant declines in payrolls for manufacturing, financial activities, and professional and business services. Job gains were concentrated in leisure and hospitality.
ADP's survey also indicates that there is a slowdown in pay growth, both for workers who changed jobs and for those who didn't. For job stayers, year-on-year gains fell to 6.9% from 7.2% in February, while job-switchers received a pay raise of 14.2%, down from 14.4%. ADP's pay tracker for job switchers has been declining for nine months now, having peaked at 16.4% last June.
ADP chief economist Nela Richardson said, "Our March payroll data is one of several signals that the economy is slowing. Employers are pulling back from a year of strong hiring, and pay growth, after a three-month plateau, is inching down." However, analysts claim that the numbers reflect only a return to more normal conditions for the labor market, from the supercharged growth seen last year. The neutral rate of additions is in the range between 100,000 and 150,000.
These numbers are taken as an invitation to bet more heavily on the Federal Reserve changing its policy course soon. The benchmark 2-year Treasury note yield has already fallen sharply earlier in the week in response to the vacancies data and a weak ISM manufacturing report, and it fell another 5 basis points to 3.78% following this report.
In conclusion, the U.S. private sector significantly slowed its hiring in March, indicating a cooling labor market. There is also a slowdown in pay growth, but analysts say these numbers reflect only a return to more normal conditions for the labor market, from the supercharged growth seen last year. The Federal Reserve may change its policy course soon in response to these numbers, as the benchmark 2-year Treasury note yield has already fallen sharply in response to the vacancies data and a weak ISM manufacturing report.
