ADP Employment Growth Picks Up in March; Pay Growth Remains Lower

The ADP National Employment Report indicated that nonfarm private sector payrolls rose 184,000 during March following a 155,000 February gain, revised from 140,000. January’s 111,000 increase was unrevised. The 1.9% y/y gain is steady with last year but below the 3.1% growth in 2022. During the last three months, payroll increases averaged 150,000, the quickest increase since September of last year. A 155,000 rise in March ADP employment had been expected in the Action Economics Forecast Survey.

Small business hiring (less than 50 employees) increased 16,000 (1.5% y/y) last month after rising 12,000 in February. Employment at medium-sized firms (50-499,000 employees) rose 93,000 (2.5% y/y), the same as in February but remained below a 220,000 June high. Large business hiring (500+ employees) rose 87,000 (1.6% y/y) during March following a 67,000 February rise. It was the quickest increase since August 2023.

By industry group, goods-producing employment rose 42,000 last month (1.6% y/y) after a 37,000 February rise. The number of construction sector jobs rose 33,000 (4.2% y/y) following a 31,000 February increase. Hiring in the manufacturing sector edged 1,000 higher (-0.7% y/y) last month after a 6,000 February gain. Natural resource & mining sector employment rose 8,000 (6.8% y/y) after holding steady in February.

Service-producing jobs rose 142,000 in March (2.0% y/y) following a 118,000 February gain. The increase was double the January rise and the strongest since September. Leisure & hospitality employment improved 63,000 in March (4.8% y/y), roughly double the gains in each of the prior two months. Trade, transportation & utilities jobs rose 29,000 (0.8% y/y) after rising 21,000 in February. Education & health service employment grew 17,000 (3.1% y/y) after rising 13,000 in February. The number of financial sector jobs also rose 17,000 (1.4% y/y) after increasing 20,000 in February. Information sector employment rose 8,000 (-1.0% y/y) after rising 1,000 in February. Professional & business service employment edged lower by 8,000 (+0.5% y/y), the second decline in three months.

Growth in median annual pay for "job stayers" held at 5.1% y/y in March, remaining well below a September 2022 high of 7.8% y/y. The earnings slowdown continued to be led by the leisure & hospitality sector, where a 5.8% y/y pay gain in March compared to a high of 16.9% y/y growth in March 2022. Construction sector pay grew a reduced 5.7% y/y and remained below a February 2023 high of 7.1% y/y. Education & health services pay rose a lessened 5.7% y/y, below a 7.3% y/y high in October 2022. Financial sector earnings rose 5.3% y/y, down from a 7.8% y/y high in November of 2022, while information sector pay rose a lessened 4.8% y/y and remained below the 8.0% y/y peak in June 2022. Factory sector earnings rose a reduced 4.6% y/y versus a high of 7.8% y/y in September 2022. Pay increases for “job changers” surged to 10.0% y/y last month, up from a 7.2% y/y low in January, but remained below the 16.4% y/y peak in June 2022.

By Census region, employment in the South rose 91,000 last month (2.2% y/y) after a 64,000 February increase. In the West, employment improved 53,000 (1.2% y/y) after rising 6,000 in February. The number of jobs in the Midwest increased 28,000 (1.8% y/y) after moving up 66,000. Employment in the Northeast improved 20,000 last month (2.1% y/y) after increasing 45,000 in February.

The ADP National Employment Report and Pay Insights data can be found in Haver's USECON database. Historical figures date back to January 2010 for private employment. Pay data date back to October 2020. The expectation figure is available in Haver's AS1REPNA database.