Private-sector and service-sector job growth slow in March

WASHINGTON — Private-sector employment growth and expansion in the vital service sector slowed last month, raising concerns about the strength of the recovery ahead of Friday’s government jobs report.

Payroll firm Automatic Data Processing Inc. said Wednesday that the private sector added 158,000 jobs in March. The figure was well below the 237,000 private-sector jobs added in February, a number that was revised up from the initial report of 198,000.

Economists had expected that ADP would show about 200,000 private-sector jobs were added last month.

“Job growth moderated in March,” said Mark Zandi, chief economist at Moody’s Analytics, which assists ADP with its monthly report. “The job market continues to improve, but in fits and starts.”

The ADP report is a key private data point ahead of the government’s monthly unemployment report. Analysts are anticipating that the Labor Department will report that the economy added about 198,000 private- and public-sector jobs last month and that the unemployment rate held steady at 7.7%.

The economy added a stronger-than-expected 236,000 jobs in February.

Zandi noted that a surge in construction employment, driven by rebuilding efforts from Superstorm Sandy in October, paused last month. The construction industry added no new jobs in March after an average monthly gain of about 35,000 from November through February.

The economist said anticipated changes from the healthcare reform law also could be weighing on companies.

Zandi expects construction job growth to pick up again in the coming months. He predicted that the government would report that the economy added about 175,000 jobs in March and that the unemployment rate would tick up to 7.8%.

But as large automatic federal budget cuts known as sequestration begin taking effect this month, Zandi figures that job growth will get weaker over the next six to nine months while businesses adjust.

Signs of weakness already were showing in a report on service industries from the Institute for Supply Management. The group’s widely watched purchasing managers index was at 54.4 in March, the 39th straight month of apparent growth for the services sector.

The March growth, though, was down from a reading of 56 the previous month, which had been the fastest pace in a year and among recent signals that the recovery was strengthening. Analysts had expected the March index to drop to about 55.5.

A reading above 50 indicates that the sector is growing.

Detailed ISM indexes that track new orders, prices and hiring in the service sector all were down in March from the previous month.

The majority of purchasing managers in the survey were positive about business conditions but displayed “an underlying concern regarding the uncertainty of the future economy,” ISM said.

The report came after ISM said Monday that manufacturing growth also had slowed last month.

jim.puzzanghera@latimes.com