145K jobs added in March as pay climbed 6.9%

Private sector employers added 145,000 jobs in March, according to payroll provider ADP, with annual pay growing 6.9% year over year, even as employers dampened their hiring amid worries over banking failures and interest rate hikes.

The report, released Wednesday by the ADP Research Institute in collaboration with the Stanford Digital Economy Lab, showed the professional and business services sector — which includes accounting and tax preparation — lost 46,000 jobs last month, while the financial activities sector lost 51,000 jobs. Overall, however, the service-providing sector added 75,00 jobs, thanks to gains of 98,000 in leisure and hospitality, and 56,000 in trade, transportation and utilities. The goods-producing sector added 70,000 jobs, including 47,000 in natural resources and mining, and 53,000 in construction, offset by losses of 30,000 in manufacturing.

"After reaching a rapid pace of job gains for the better part of the year, the jobs market shifted to a slower gear in March," said Nela Richardson, chief economist at ADP, during a conference call Wednesday with reporters. "This deceleration occurred in pockets, with both goods and services alternating between gains and losses. Private sector employment grew by 145,000 jobs last month, and that's down from a revised 261,000 jobs posted in February. Job gains were fairly evenly split between the goods and services industry. This is one of the unique aspects of the shift we're seeing in the labor market because we've been seeing the service sector really dominate hiring. That wasn't true this month."

Patrick T. Fallon/Bloomberg

Small businesses added 101,000 jobs last month, including 38,000 at businesses with between one and 19 employees, and 63,000 at businesses with between 20 and 49 employees. Midsized businesses with between 50 and 249 employees added 75,000 employees, but companies with between 250 and 499 employees lost 42,000 jobs. Large companies with 500 or more employees gained only 10,000 jobs.

"Small firms actually proved to be benefiting most from this overall loosening of the labor market in terms of hiring demand," said Richardson. She added that small firms are finding a bit more success in finding qualified talent. 

Annual pay growth appeared to decelerate for both employees who stayed in their jobs and those who changed jobs. For job stayers, year-over-year gains fell to 6.9% in March from 7.2% in February. Annual pay growth for job changers was 14.2%, down from 14.4%. In the financial activities sector, annual pay growth was 6.8%, and in professional and business services, it was 6.4%.

"One of the reasons for the slowdown in job stayer pay growth was a drop in incentive pay in March compared to the same time last year," said Richardson. "Bonuses and other forms of incentive pay tend to trend up in the month of March. We actually saw that pay growth drop this month compared to a year ago. A year ago, in March 2022, we saw really strong increases in bonus pay."

She pointed to findings from the U.S. Bureau of Labor Statistics' most recent Job Openings and Labor Turnover Survey that showed job postings coming down, but initial jobless claims still low, but edging up a little bit. "Companies are still holding on to workers, but not quite as tightly as they did last year," said Richardson. "Putting all of that together, we might see more balance in the labor market in terms of hiring demand meeting that supply."