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Wednesday, April 1, 2015

This morning’s soft private-sector jobs report from the ADP (ADP) jobs report is in line with the recent trend of weakening economic momentum — the data is still strong, but nevertheless on the weak side.

We will get more color on the health of the U.S. economy from the factory sector ISM survey coming out a little later. But the picture emerging from the data thus far is that the US economy slowed down in the first quarter, likely reflecting a replay of the weather-related factors that held back the economy in the first quarter of 2014 as well.

The ADP read came in below estimates at 189K for March vs. estimates of about 230K – the first tally under 200K after 11 straight months of coming above that level. The consensus expectation for Friday’s BLS report is for ‘headline’ gains of 247K (per Bloomberg.com), which includes government jobs that have been averaging about 10K to 12K monthly. Today’s report will prompt folks to lower their estimates for the Friday jobs headline number.

The gains in today’s report were broad-based, though jobs gains for large businesses (500 or more employees) were notably weak with only 19K jobs added in March. This could be the effect of strong dollar on multi-national companies. Also, the mining sector likely has started showing signs of distress to reflect what’s happening with oil. Medium and small-businesses added 62K and 108K during the month.

The Goods-Producing sector added a weaker-than-expected 5K jobs in March, with Construction adding 17K and Manufacturing losing 1K jobs for the month. It will be interesting to look for corroboration of this development in the factory ISM survey later today. The Service sector added 184K in March, with the Trade, Transportation and Utilities category adding 25K. The Professional and Business Services groups produced 40K jobs.

This is a soft report, continuing the trend we have been seeing from other recent reports. The most likely interpretation for this trend is weather-related factors along the lines of what the U.S. economy encountered in the first quarter of 2014. What this would mean is that the slowdown isn’t enduring enough to prompt the Fed to change its monetary policy plans, but it’s nevertheless weak enough to have a bearing on employment and corporate fundamentals.

Sheraz Mian

Director of Research

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