INDICATOR: March ADP Employment Estimates
KEY DATA: ADP: +158,000: Small: 74,000; Medium: 37,000; Large: 47,000
IN A NUTSHELL: "Job growth may have slowed a bit but it doesn't look like it is falling apart."
WHAT IT MEANS: Friday is "Employment Friday" so today is "ADP Wednesday", when we get the employment services firm's estimate of the hiring that the private sector did during the month. It looks like companies did a little less hiring in March than they had been doing. ADP's estimates were the lowest since October of last year when we were facing the "fiscal cliff". Now, there is the uncertainty about the impact of sequestration. Still the details were not discouraging. Small firms continue to hire, a trend that the National Federation of Independent Businesses confirmed with its report on jobs. In addition, there are still strong employment gains being posted by large firms. The one less than stellar segment was the in medium-sized companies that are between 50 and 499 workers. Why we are seeing less hiring in the mid-sized companies is unclear and it just may be a temporary result. Manufacturers added workers and with vehicle sales continuing to rise, that should continue. Construction was flat and once again, that may just be a temporary issue.
MARKETS AND FED POLICY IMPLICATIONS: Friday we get the government's view on the labor market and I suspect the job gains will be less than February's 236,000. ADP is generally around the Labor Department's number but I think we may see an increase between 175,000 and 200,000 with a possible decline in the unemployment rate. If we get those numbers, that would be a positive sign that the economy is hanging in there. But it is the future that most of us are concerned about. The NFIB data don't point to strong small business hiring going forward and the impacts of the tax increases and sequestration will start to kick in as we go through the spring. Thus, I am not optimistic we can keep posting payroll gains in excess of 200,000 per month that would mark and economy that is accelerating. The markets will likely view this with caution but not necessarily a sign that conditions are weakening.