Anyone hoping the U S. economy in 2013 would gain strength from job growth needs to check out Wednesday’s ADP National Employment Report.
According to ADP, the U.S. economy added 158,000 private-sector jobs in March, well below projections of 200,000 – 215,000. That’s the smallest gain since October when companies hired just 148,000.
March’s lackluster showing was mainly due to lower job creation in construction. The industry enjoyed robust hiring in the months following late October’s Hurricane Sandy. In its wake, the superstorm left behind upwards of $50 billion in damages.
A tepid recovery in the housing market in Q1 also helped the sector in January, with recent monthly gains in construction averaging 35,000.
In March, however, no new construction jobs were added.
“If that’s the case, underlying job growth is not changed appreciably,” Moody’s Analytics chief economist Mark Zandi told Reuters. He estimates overall employment growth is running near 175,000 a month.
March’s jobs report included a revised 237,000 gain for February from the previously reported 198,000. But January’s numbers were revised down to 177,000 from 215,000.
So what does this mean for Friday’s U.S. jobs report?
What to Expect Friday for March U.S. Jobs
The tame ADP report prompted Deutsche Bank’s chief economist, Joseph LaVorgna, to slash his projections for the Labor Department’s Friday report, which reflects both government and private-sector hiring. LaVorgna’s new forecast is for the addition of 160,000 jobs in March, down 40,000 from his prior forecast.
Moody’s Zandi also has low expectations. He sees waning job creation to endure for up to nine months, with the overall monthly jobs growth falling to 125,000.
According to a Dow Jones Newswire survey, 200,000 jobs are expected to have been created in March, with the unemployment rate holding steady at 7.7%.
A disappointing report means the Fed’s stimulus measures will be safe for a while. Yet it could push bullish investors into the bear camp and derail the stock’s market’s record rally-at least temporarily.
U.S. Economy 2013: Don’t Rely on Job Growth
Wednesday’s ADP data is a reflection that firms remain guarded when it comes to investing, expanding and hiring – not a good sign for the U.S. economy.
The fresh report is the latest economic indicator in the past week to let investors down with a worse-than-expected read. It also suggests the U.S. economy will simply sputter along this spring and early summer for the third consecutive year.
The handful of additional economic markers signaling caution ahead includes:
- Consumer confidence slipped in March to 59.7% from 68.0% in February.
- Jobless claims jumped over 350,000 last week for the first time in a month and a half.
- The ISM manufacturing index slipped to 51.3% last month from a 12-month high of 54.2% in February–the lowest showing since August.
It’s that kind of disappointing data that has a majority of economists calling for a deceleration in Q2 growth. Gross domestic product is forecast to slump from an estimated 2.8% in Q1 to 2.2%, according to MarketWatch.
Growth is expected to pick-up in the second half of the year, but moderately at best.
Economists foresee consumers reigning in spending and boosting savings, which plummeted following tax hikes and soaring gas prices at the start of the year.
Businesses are apt to add to inventories at a snail’s pace after bulking up in the first quarter. Effects from sequestration will begin to be felt in earnest. And, global woes will limit U.S. exporters’ upside.
The recession may have officially ended in 2009, but calling the current U.S. economy a “recovery” is a stretch.
By DIANE ALTER, Contributing Writer, Money Morning
April 3, 2013