Private-sector hiring was solid in March, but worries about the outlook for the U.S. job market continue

By Greg Robb

Labor-market growth is concentrated in a few industries, and further impact from the oil shock could lie ahead

Job growth in the private sector rose at a solid pace in March for the second straight month, according to payroll company ADP.

ADP's monthly report showed that the private sector of the U.S. economy added 62,000 jobs last month, down from a revised 66,000 seen in February.

Economists polled by the Wall Street Journal had forecast a gain of 39,000.

The data suggest "a labor market that is cooling gradually - not cracking," said Matthew Martin, senior economist at Oxford Economics.

Key details: The bulk of the March hiring was in healthcare and education.

Construction employment picked up in March with gains of 30,000, aided by improvement in the weather.

Small businesses drove all of the job gains in March. Medium-size and large businesses shed jobs during the month.

Workers who stayed in the same job saw their incomes rise 4.5% in the 12 months ending in March - the same rate as the past three months, ADP said. For job switchers, year-over-year pay accelerated to a 6.6% gain from 6.3% in the prior month.

Big picture: The labor market has stabilized in a low-hire, low-fire environment, while the unemployment rate has been in a range of 4.3% to 4.5% since last summer.

"The labor market has been sending an unusual set of mixed signals," John Williams, president of the New York Fed, said in a speech earlier this week.

Many economists think that the labor market is vulnerable and that layoffs could pick up as companies face higher energy prices due to the Iran war.

"If our analysis is correct, higher energy prices will lead to higher prices in general and lower sales. That means cost reductions have to be found to preserve profits as much as possible, and headcount reduction is the fastest way to do that," said Carl Weinberg, chief economist at High Frequency Economics.

Other economists think the economy is at full employment, with most workers who want one having a job. They say the slow hiring is driven by a lack of worker supply, stemming in part from White House anti-immigration policies.

Economic data this week indicate the oil shock has yet to hit the economy. It is expected to boost inflation through higher gasoline prices but also to dampen growth as consumers see a decline in discretionary spending power.

The likelihood of a recession in the U.S. has risen to an uncomfortably high level of 40%, said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management, in an interview with Bloomberg.

In normal times, chances of a recession are around 15%.

Market reaction: Stocks SPX were set to open higher on Wednesday. The yield on the 10-year Treasury note BX:TMUBMUSD10Y fell to 4.288% in early trading.

-Greg Robb

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

04-01-26 0919ET