The number of private sector jobs rose by 155,000 in March, and annual wages rose 4.6% year-on-year, according to the March ADP® National Employment Report, released by ADP Research in collaboration with the Stanford Digital Economy Lab (“Stanford Lab”). The National Employment Report (ADP) An independent measure and high-frequency view of the private sector U.S. labor market, based on anonymous actual salary data for more than 25 million U.S. employees.
The Jobs and Wage Statistics report uses aggregated and anonym zed payroll data from ADP to present a representative picture of the private sector labor market. The report details the total change in private sector employment during the current month, and weekly jobs data from the previous month. Due to the continuous updating of ADP’s core salary databases, the report provides a high-frequency, near-instantaneous measure of the labor market. In the U.S. This metric reflects the number of employees registered on ADP customer payroll (payroll recruitment) to provide a deeper understanding of the labor market. As of January 2025, the ADP Wage Insights Metric monitors approximately 14.8 million observations of individual pay changes per month, up from nearly 10 million when it was launched.
Nella Richardson, chief economist at ADP, said: “Despite political uncertainty and declining consumer confidence, the bottom line is that March’s revenue figure was good for the economy and employers of all sizes, if not necessarily for all sectors.”
The manufacturing sector posted above-average job increases for the second consecutive month. Employment in the construction sector has slowed. The natural resources, trade, transport and utilities sectors lost jobs.
Year-on-year wage increases slowed to 4.6% for workers who remained in their jobs, and to 6.5% for workers who changed jobs.
Market Reactions to U.S. Nonfarm Employment Change
Traders and economists expect the Nonfarm Payrolls report to show that the U.S. created 164,000 new net jobs, with average hourly earnings up 0.3% month-on-month (4.0% y/y) and the U3 unemployment rate stabilizing at 4.2%.
Last month’s jobs report exceeded expectations in terms of overall job growth and revision of previous estimates, but much of that strength can be attributed to recovery from previous weather-related disruptions. More importantly, the household survey was relatively weak, resulting in a low participation rate and a high unemployment rate (to 4.0%).
For this month, the outlook is tepid, with economists expecting “only” 164,000 net new jobs and the unemployment rate to remain steady at 4.2%. Among the key areas to watch is the average hourly wage gauge, which has risen slightly in recent months, raising concerns about accelerating wage growth and potentially limiting the Fed’s scope to cut interest rates further if it continues to do so.:
As the bottom left box below indicates, traders are skeptical that the Fed will offer a lot in terms of additional interest rate cuts this year, with only one 25 basis point cut expected in the first half of the year and only a 50/50 chance of a second cut in the second half of 2025. With few jobs and inflation reports left ahead of the Fed’s “decisive moment,” this week’s jobs report may not be as impactful as the market as other more impactful releases immediately.
The employment component of the ISM manufacturing PMI fell to 45.3 from 48.1 last month. The Institute for Supply Management’s service sector employment index stood at 51.4 compared to 51.5 last month. The ADP employment report showed 122,000 net new jobs, down 146,000 jobs last month.
Expectations for the current month and the impact of the change in US nonfarm Employment on interest rates
Looking ahead, analysts are cautiously optimistic about the trajectory of the labor market. While the December report provided encouraging signs, challenges remain. The constant threat of inflation, especially in sectors such as energy and food, can affect consumer purchasing power and, consequently, job growth. In addition, geopolitical uncertainty, including tensions in Eastern Europe and potential disruptions in global supply chains, could pose risks to the labor market.
The outlook for upcoming NGPY change reports is mixed. Some analysts expect job growth to begin to slow as the economy moves closer to full employment. Others argue that the labor market still has room for growth, especially in sectors that are lagging behind in recovery. The Fed’s actions in the coming months will play a crucial role in shaping the job landscape. As the central bank navigates the delicate balance between supporting economic growth and controlling inflation, its decisions will have far-reaching implications for the labor market.
When weighing our internal data and models, key indicators point to a reading roughly as expected in this month’s NFP report, with key job growth likely to come somewhere in the 150-200k range, albeit with a large range of uncertainty given the current global backdrop..
Regardless, the monthly fluctuations in this report are very difficult to predict, so we don’t count too much on any forecasts (including our own). As always, other aspects of the release, notably the closely watched average hourly earnings figure of 0.4% m-o-m in the latest NM report..
As we will explain below, the US dollar rose to test its highest levels in more than two years, but the recent pause near those high levels prevented the pair from heading to the nonfarm payrolls report in an overbought state.
