Private Sector Employment Growth Surpasses Expectations in March

Private sector employment growth exceeded expectations in March, with health care and construction leading the way, according to a report released by payrolls processing company ADP on Wednesday.

The report revealed that job growth totaled 62,000 for the month, only a slight decrease from February’s upwardly revised figure but surpassing the Dow Jones consensus of 39,000. It is important to note that ADP’s report does not include government employees.

Similar to the previous month’s report, two sectors were the primary drivers of job gains. Education and health services contributed 58,000 jobs, the same as February, while construction added 30,000. The health services sector’s total was impacted in the prior month due to a strike at Kaiser Permanente that affected over 30,000 workers in Hawaii and California.

Nela Richardson, ADP’s chief economist, highlighted the significance of the health care sector in the current labor market landscape, stating, “We’ve seen two consecutive months of pretty steady job growth, but most of it has been in health care. That’s really the story. Health care is transforming the labor market.”

Additionally, information services added 16,000 jobs, natural resources and mining contributed 11,000, and leisure and hospitality saw a gain of 7,000. On the flip side, trade, transportation, and utilities lost 58,000 workers, while manufacturing experienced a decline of 11,000.

March witnessed a rare balance in job creation between goods producers and service providers, with 30,000 jobs added in the former category and 32,000 in the latter. Small businesses led the way in hiring, adding 85,000 jobs, while medium-sized establishments lost 20,000 and large firms reported a decline of 4,000.

Richardson noted that small businesses have been leading in hiring for the second consecutive month, possibly due to factors such as inflation impacts and the need for additional jobs to keep up with rising prices.

Wage growth for employees staying in their current positions remained steady at 4.5%, while job changers saw an increase of 6.6%, up 0.3 percentage points from February.

The release of the ADP report comes ahead of the Bureau of Labor Statistics’ nonfarm payrolls report, with economists forecasting a gain of 59,000 jobs following February’s reported loss of 92,000. The unemployment rate is expected to remain unchanged at 4.4%.

On a separate note, retail sales showed a solid increase in February, rising by 0.6% after a slight decline of 0.1% in January. The figure surpassed the forecast of 0.5%. Excluding auto sales, retail sales grew by 0.5%, exceeding the projected 0.3% increase.

Furthermore, the ISM manufacturing index reported a slightly better-than-expected reading of 52.7 in March, indicating the percentage of firms reporting expansion. However, the prices index experienced a significant surge, reaching 78.3, the highest level since June 2022.