U.S. companies experienced a surge in hiring during March, defying expectations amid rising interest rates, as revealed by the ADP National Employment Report on Wednesday.
The labor market demonstrated remarkable resilience, with businesses adding an impressive 184,000 jobs last month, surpassing both the upwardly revised February figure of 155,000 and economists’ predictions of 148,000.
According to ADP chief economist Nela Richardson, the report was particularly noteworthy for its unexpected pay gains across various sectors.
“Inflation has been cooling, but our data shows pay is heating up in both goods and services,” Richardson commented. Workers who changed jobs saw a significant 10% annual pay increase, the highest since July, while those who remained in their positions experienced a steady 5.1% wage growth.
The report highlighted job growth across multiple industries, with the leisure and hospitality sector leading the pack, onboarding 63,000 new employees.
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Other sectors, such as construction (33,000), trade, transportation and utilities (29,000), and financial activities (17,000), also witnessed substantial hiring gains. Interestingly, only the professional and business services sector experienced a decline in hiring.
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The robust labor market performance comes amidst the Federal Reserve’s aggressive tightening campaign, which has pushed interest rates to their highest level since 2001.
As Wall Street closely monitors the labor market for indications of a slowdown, enabling the Fed to shift towards rate cuts, central bank officials have signaled their anticipation of rate reductions later this year. However, they emphasize the need for further evidence of inflation returning to the 2% target.
The ADP report precedes the highly anticipated March jobs report from the Labor Department, scheduled for release on Friday morning.
Economists expect the official data to show an addition of 200,000 workers, following February’s gain of 275,000, with the unemployment rate remaining steady at 3.9%.
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It is important to note that ADP numbers can vary significantly from the government’s official count and have historically been an unreliable predictor of future trends.
