Strong Read on Job Creation Sets Stage for Powell Rate Cut Comments
The ADP Employment Change report for March offered a much stronger read on the economy and this could impact Fed rate cuts.
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ADP’s Employment Change report found the private sector added 155,000 jobs in March, more than double the number added in February and not that far off the 177,000 averaged across October 2024 to January 2025.
That’s a far stronger read on job creation in March than indicated by ISM’s March Manufacturing PMI, but let’s remember ADP’s figure includes the Service sector.
We won’t get ISM’s read on that part of the economy, which drives 85%-plus of GDP until Thursday. Should that report show a very different hiring picture than the contracting and de-staffing one found for the manufacturing economy in March, and the composite employment figure between the two March ISM reports support ADP’s March job findings, the odds of Fed Chair Powell softening his rate cut comments on Friday will fall.
We still have the March Employment report on Friday morning, and that will contain both private as well as public sector jobs. Expectations call for a 50,000 loss for government payrolls in Friday’s report, and we’ll want to delineate between that March figure and hiring in the private sector as we contemplate the economy’s strength.
Looking at ADP’s wage findings for March, pay for job stayers rose 4.6% year over year while for job changers it was up 6.5%. Both figures are down modestly compared to the last few months but are still well above the Fed’s 2% inflation target. Despite those wage gains, consumers are still reacting to larger economic uncertainty given layoff headlines and tariff concerns. More than likely, this means we will see the savings rate tick higher again when we get the March data later this month.
