"Small Non-Farm" Surpasses Expectations! U.S. March ADP Employment Increase of 62k, Wages Accelerate Growth

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The US private-sector employment market shows signs of stabilizing, with the number of new jobs in March far exceeding expectations.

ADP Research Institute released Wednesday data showing that the US added 62,000 new private-sector jobs in March, above the median forecast of 40,000 by Bloomberg survey analysts. The previous month’s new job data was 63,000, roughly similar to this month.

On the wage front, there are also positive signals. The annual pay increase for retained employees remains at 4.5%, holding steady for three consecutive months; the pay increase for employees who switched jobs rose by 0.3 percentage points from the prior month to 6.6%. ADP’s report was released in collaboration with the Stanford Digital Economy Lab, and the data covers more than 26 million US private-sector employees.

ADP Chief Economist Dr. Nela Richardson said, “Overall employment performance in March was solid, and pay growth for job switchers also increased.”

Healthcare and construction capture nearly all incremental growth

Employment growth in March showed a highly concentrated pattern.

The education and healthcare services sector added 58,000 new jobs, unchanged from February, becoming the biggest source of employment; construction added 30,000 jobs; information services contributed 16,000; natural resources and mining increased by 11,000; leisure and hotels saw a modest increase of 7,000 people.

Richardson said that over the past year, the healthcare and health sector contributed the vast majority of the new jobs, and the industry has become the core engine driving the labor market.

At the same time, the trade, transportation, and utilities segment lost 58,000 jobs, manufacturing fell by 11,000, and that dragged down overall data performance. Worth noting is that in an economy led by services, the employment gains in the goods-producing and services sectors in March were unusually close to balance—30,000 and 32,000, respectively.

Small businesses lead hiring for two consecutive months

By company size, small businesses with fewer than 50 employees added 85,000 jobs, leading employment growth for the second month in a row; medium-sized firms reduced 20,000 jobs; and large firms with 500+ employees net cut 4,000 jobs.

Richardson pointed out that the pickup in small-business hiring may be, on the one hand, a “compensatory catch-up” for this group, and on the other hand it may reflect households’ demand for second or third jobs in an inflationary environment—such job demand is often concentrated among small employers.

ADP data also shows that in March, microenterprises with fewer than 20 employees accounted for the majority of the employment increment for the month.

“Not hiring, not laying off” pattern continues

The overall labor market is currently in a “low hiring, low layoffs” state, but external uncertainty is rising.

Powell said this week that decision-makers are still unclear about how an Iran war would affect the economy, but “we believe current policy is in a good position to wait and observe.”

Analysts said that tax-cut policies may provide some support for investment and employment growth, but if the Iran situation persists, higher energy prices and a hit to consumer confidence could suppress future hiring.

The official non-farm payroll employment report set to be released on Friday is drawing keen attention from the market. In February this year, US employment fell sharply from the pandemic period, largely due to a strike by more than 30,000 Kaiser Permanente employees and harsh winter weather. The market broadly expects March data to rebound.