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First Cut: ADP National Employment Report an upside surprise in March

The ADP National Employment Report for March was an upside surprise at down 27,000 after a revised up 179,000 (previously 183,000) in February. The decrease was well above the median expectation. The ADP number should be read with care. It can miss — and miss big — compared to the private payrolls change in the BLS’s Employment Situation. However, the March data suggest that businesses were not anxious to lose workers except where absolutely necessary in the initial response to the pandemic. There may have been hope that activity would be closed down for nonessential businesses for only a short period. Now that the measures to limit face-to-face contact have been extended and deepened, April’s employment numbers will probably be the ones to take the plunge.

The implications for the establishment survey payroll data in the March employment report on Friday at 8:30 ET are for less dire declines that might have originally been anticipated. The low end of the forecast range is likely to be lifted.

Payrolls were down 9,000 for goods producers and reflected a decrease of 16,000 in construction that was partially offset by a meager 1,000 increase in natural resources and 6,000 in manufacturing. The decline in construction payrolls came after three months of increases that were contrary to normal seasonal patterns for the winter months. Typically construction will add jobs in the spring, but this year payrolls were already higher. Gains in manufacturing were probably taken before the more stringent measures to limit the spread of COVID-19 and as manufacturers hired what skilled workers they could find among the limited supply.

Service sector payrolls were down 18,000 in March with a somewhat mixed performance. There were large gains in healthcare of 44,000 that should not be a surprise in the current situation. Leisure and hospitality declined 11,000, which is to be expected, as was the 37,000 in trade, transportation, and utilities.


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