ADP Employment Report – March 2025 Review

Private sector hiring showed unexpected resilience in March, with ADP reporting a gain of 155,000 jobs, handily beating consensus expectations of 120,000 and marking an acceleration from February’s upwardly revised 140,000 gain. While this doesn’t paint a picture of a booming labor market, it does point to steady, if uneven, hiring activity—particularly in service-oriented sectors—despite mounting economic uncertainty and ongoing trade policy drama.

The goods-producing sector added 24,000 jobs, fueled by a second consecutive month of strength in manufacturing, which added 21,000 positions. However, this strength was offset by modest hiring in construction (+6,000) and a decline in natural resources/mining (-3,000). On the services side, gains totaled 132,000, led by robust hiring in professional/business services (+57,000) and financial activities (+38,000). Leisure and hospitality posted a moderate increase (+17,000), while trade, transportation, and utilities lost 6,000 jobs, reflecting potential early fallout from tariff fears.

Wage growth continued to moderate in March. The ADP Pay Insights data showed that job-stayers saw annual pay increases of 4.6%, down slightly from February’s 4.8%, while job-changers earned 6.5% more, still elevated but near the cycle low. Notably, the pay premium for switching jobs has narrowed to 1.9 percentage points, matching the lowest level since September and suggesting that employers may be regaining some bargaining power in a cooling labor market.

Chief Economist Nela Richardson noted that despite growing policy uncertainty and softening consumer sentiment, March hiring was “a good one for the economy and employers of all sizes, if not necessarily all sectors.” The sectoral divergence was clear, as some industries—particularly trade-related ones—began to show cracks.

Recent ADP reports have shown a zigzag pattern, with private job creation oscillating between 100K and 180K. March’s upside surprise breaks a softening trend and reinforces the idea that the labor market remains fundamentally sound even as macro headwinds build. The professional and financial services sectors continue to lead the recovery, while goods-producing and consumer-facing sectors show more volatility.

For the Federal Reserve, today’s data is unlikely to significantly alter the current trajectory. Markets are still pricing in 50 basis points of rate cuts in 2025, with labor data being interpreted through the lens of growth risk rather than inflation acceleration. The slowing pace of wage gains bolsters the disinflation narrative, even as hiring remains healthy. However, policymakers will want to see whether the strength in ADP’s report is echoed in Friday’s NFP release, where consensus currently sits near 175,000.

With tariffs on Canadian and Mexican imports set to hit soon, and “Liberation Day” expected to introduce additional economic friction, labor market data will remain a critical gauge of the U.S. economy’s capacity to absorb shocks. Today’s report offers a glimmer of strength, but beneath the surface, the regional and sectoral cracks are starting to show.