Private sector employers added 241,000 jobs in March, according to payroll giant ADP, as the new tax law and the strong economy helped boost hiring.

Small businesses added 47,000 jobs, including 35,000 at businesses with between one and 19 employees, and 12,000 at companies with between 20 and 49 employees.

Midsized businesses with between 50 and 499 employees gained 127,000 jobs last month. Large businesses added 67,000 jobs, including 13,000 at companies with between 500 and 999 employees and 54,000 at corporations with 1,000 employees or more.

The service sector gained 176,000 jobs, including 44,000 in professional and business services such as accounting, tax prep and other services. The goods-producing sector added 65,000 jobs, including 29,000 in manufacturing.

ADP National Employment Report March 2018

“We saw impressive momentum in the first quarter of 2018 with more jobs added per month on average than in 2017,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, in a statement. “Midsized businesses added nearly half of all jobs this month, the best growth this segment has seen since the fall of 2014. The manufacturing industry also performed well, with its strongest increase in more than three years.”

Mark Zandi, chief economist of Moody's Analytics, which compiles the monthly national employment report with ADP, said the tight labor market is continuing to tighten. He believes the unemployment and underemployment rates will continue to decline.

“The job gains were broad based, strong everywhere, on the goods side of the economy with manufacturing and construction, and also on the service side of the economy with trade and health care,” he said during a conference call with reporters Wednesday. “It’s also broad based across company size. The labor market is in high gear.”

He predicts wage growth is on track to be close to 3 percent year over year in the not too distant future.

The only concern is the impact of tariffs, which could put a damper on growth. Zandi believes it would only shave 0.1 to 0.2 percentage points from gross domestic product growth over the next year, but he expects GDP to grow over the next year by close to 3 percent.

“This will put a dent in that growth, but just a dent,” said Zandi. “So far at least this is relatively minor from a macroeconomic perspective. But obviously this has more important consequences and bigger impacts on certain sectors of the economy and industries that are getting directly impacted by the hike in tariffs in the U.S. and China. Farmers are going to get affected. Boeing is going to get affected, car manufacturers might get affected. But from a macroeconomic perspective, so far it’s relatively modest. But this is still a script being written. We’ll have to see how this plays out. Obviously the trend lines don’t look good. If we’re getting into a tit for tat skirmish over tariffs and the ball is now back in the Trump administration’s court, we’ll have to see how the administration responds. Hopefully cooler heads prevail and this will start to moderate, but there’s certainly a risk to the outlook.”

Tax cuts and government spending are helping fuel the economy for now. “It going to take a lot to derail this economy,” said Zandi. “There’s a lot of juice in the train. We’ve got very large tax cuts, and big, big increases in government spending, much of it deficit financed. That adds a lot of stimulus to the economy, so that will cover up any mistakes we make pretty quickly. I suspect a year from now, when we do the April 2019 report, unemployment in the U.S. will be closer to 3 percent, from 4 percent currently, so the prospects for growth are good.”

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