Private sector employment unexpectedly showed a continued decrease in March, according to a report released by payroll processor Automatic Data Processing, Inc. (ADP) on Wednesday, although the drop still marked the smallest since employment began falling in February of 2008.
The report showed that non-farm private employment fell by 23,000 jobs in March following a revised decrease of 24,000 jobs in February. The loss of jobs surprised economists, who had expected an increase of about 40,000 jobs compared to loss of 20,000 jobs originally reported for the previous month.
ADP noted that the lack of improvement in employment from February to March is consistent with the pause in the decline of initial unemployment claims that occurred during the winter.
The unexpected decrease in private sector jobs was largely due to a continued decrease in employment in the goods-producing sector, which fell by 51,000 jobs. The decrease included the loss of 9,000 jobs in the manufacturing sector.
Meanwhile, the drop in jobs was partly offset by the second consecutive monthly increase in employment in the service-providing sector, which increased by 28,000 jobs.
ADP added that employment at large business fell by 7,000 jobs, while employment at small businesses fell by 12,000 jobs. Employment at medium-size businesses fell by a more modest 4,000 jobs.
Paul Ashworth, Senior U.S. Economist at Capital Economics, said that the unexpected drop in private sector employment in March is disappointing for two main reasons.
"First, roughly nine months after the recession in output finished last year, the economy is still losing jobs," he said. "Yes, employment sometimes lags output by a few months, but not normally by this long."
Ashworth added, "Second, the improvement in labor market conditions appears to be slowing. The 23,000 decline in March was only marginally better than the 24,000 drop in February."
The private sector data may raise some concern about the outlook for the Labor Department's monthly employment report due to be released on Friday.
However, ADP noted that its data for February was not restrained by the effects of inclement weather, and subsequently the data for March did not include a weather-related rebound. The company also noted that its March data does not include any federal hiring for the 2010 Census.
"For both these reasons, it is reasonable to expect that Friday's employment figure from the [Labor Department] will be stronger than today's estimate in the ADP National Employment Report," ADP said.
At the same time, Ashworth said, because of those two factors, "The ADP survey is arguably giving us a more accurate reading on the underlying health of the labor market right now."
The Labor Department report, which includes both public and private sector jobs, is scheduled to be released at 8:30 am ET on Friday. The report is currently expected to show an increase of about 190,000 jobs in March following a decrease of 36,000 jobs in February.
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