Employers added 189,000 jobs in March, according to payroll giant ADP, in a sign of softening in the labor market, mainly due to the decline in oil prices and surge in the value of the dollar.
Small businesses added 108,000 jobs in March, up from 103,000 in February, including 57,000 in businesses with between one and 19 employees and 51,000 in businesses with between 20 and 49 employees. Midsize businesses with between 50 and 499 employees added 62,000 employees in March, up from 57,000 the previous month. Large businesses added 19,000 employees in March, down sharply from approximately 53,000 in February. That included 7,000 jobs in March at companies with between 500 and 999 employees, down from about 11,000 in February, and 12,000 jobs in March at companies with 1,000 employees or more, down from around 43,000 in February.
“March job gains came in under 200,000 for the first time since January of last year,” said ADP president and CEO Carlos Rodriguez in a statement. “The decline was centered in the largest companies, those with 1,000 or more employees.”
Goods-producing employment rose by only 5,000 jobs in March, down from 22,000 jobs gained in February. The construction industry gained 17,000 jobs in March, down from 28,000 in February. Meanwhile, manufacturing lost 1,000 jobs in March, after adding 2,000 in February. In addition, 20,000 franchise jobs were added in March.
Service-providing employment rose by 184,000 jobs in March, down from 192,000 in February. The professional and business services sector, which includes accounting, tax and other services, contributed 40,000 jobs in March, up from 34,000 in February. Expansion in the combined trade, transportation and utilities sector grew by 25,000, a decline from February’s 32,000. The 16,000 new jobs added in financial activities represent a drop from February’s total of 19,000 jobs added.
Mark Zandi, chief economist of Moody’s Analytics, which compiles the monthly employment report with ADP, noted that the fallout from the collapse in oil prices and surge in the value of the dollar hit the job market last month. However, despite the slowdown, underlying job growth remains strong enough to reduce slackness in the labor market.
“The number today was on the soft side,” Zandi said Wednesday during a conference call with reporters. “The 189,000 private sector jobs created in the month of March is significantly below the pace of growth we’ve been getting in recent months.”
He noted that according to the U.S. Bureau of Labor Statistics, average monthly job growth over the past six months through February was 300,000 jobs. “This is meaningfully less than that,” Zandi added. “There are several reasons for the slowdown that may prove persistent, at least over the next few months. The first is the fallout from the decline in oil prices. The decline ultimately will be a net plus for jobs, but the early effects are negative because the energy sector is quickly rationalizing, cutting back investment and now jobs. You can see that quite clearly in the rather sharp declines in employment gains in the resource and mining sector in the ADP data. We’re going to see some further declines there over the next three to six months.”
However, he believes the benefit of the lower oil prices for U.S. consumers will eventually lead to stronger retail activity and more jobs, but that will take time.
The surge in the value of the dollar is also having a negative impact on job growth. “It’s showing up most vividly in manufacturing,” said Zandi. “We saw a relatively weak gain in manufacturing employment in the month of March and I would anticipate some outright declines in manufacturing employment as we make our way into the spring months.”
The transportation and distribution sectors may also see job declines from the impact on trade, he predicted. Larger multinational companies in particular are seeing an impact from the stronger dollar.
“Large companies are becoming more reticent in their hiring,” said Zandi. “It’s not like they’re cutting employment. They’re just not adding as aggressively to payrolls as they were as recently as a few months ago. That will be a general trend over later this year and into next.”
Another factor, he believes, is the winter weather, which was severe in the Northeast in February, and the impact lingered into March. “You can feel it a little bit more in the weather sensitive sectors of the economy such as leisure and hospitality,” said Zandi. “These are temporary and there will be a bounce-back.”
He does not believe that there will be further monthly job gains of over 300,000 in this economic cycle, but he predicts that job growth will return to around 250,000 jobs per month.
“At that pace, by this time next year, certainly no later than the summer of 2016, we will be back to full employment,” said Zandi. “We’re getting close to that. That would be absorbing all the unemployed, including part-timers who would like to work full time and some of those marginally attached workers that have stepped out of the workforce, discouraged by job prospects and will step back in as job prospects improve and perhaps wage growth accelerates. I would anticipate that we will see a more meaningful pickup in wage growth in the coming months. In the spring and summer that should become more obvious.”
