WASHINGTON: US private employers added the smallest number of workers in more than a year in March and factory activity hit a near two-year low, fresh signs that economic growth slowed significantly in the first quarter.
The economy has been slammed by a harsh winter, a strong dollar and weaker global demand. While the effects of bad weather should start to fade, dollar strength could remain a constraint and limit a rebound in output.
Soft growth may prompt the Federal Reserve to delay an anticipated interest rate increase until September. The US central bank has not raised its key lending rate since 2006.
"The economy hit yet another rough spot in the first quarter ... which is one of many factors that will make it difficult for the Fed to achieve 'lift-off' by mid-year," said Diane Swonk, chief economist at Mesirow Financial in Chicago. Private payrolls increased by 189,000 last month, the smallest gain since January 2014, the ADP National Employment Report showed on Wednesday.
That was well below economists' expectations for an increase of 225,000. Job gains slowed almost across all sectors, with manufacturing payrolls declining for the first time since January 2014.
The ADP report, which is jointly developed with Moody's Analytics, was released ahead of the government's more comprehensive employment report on Friday.
While the ADP report has a poor track record of predicting nonfarm payrolls, it raises the risk that Friday's number could be softer than economists are forecasting. A Reuters survey predicted payrolls increased 245,000 last month after rising 295,000 in February.
In a separate report, the Institute for Supply Management (ISM) said its national factory activity index fell to 51.5 last month, the lowest reading since May 2013, from 52.9 in February. A reading above 50 indicates expansion in the manufacturing sector. New orders and factory employment hit 22-month lows. Order books shrank and export orders contracted further.
But there is reason for cautious optimism. Auto sales rebounded to an annualized rate of 17.15 million vehicles in March from a rate of 16.2 million vehicles in February.
That, together with a surge in consumer confidence last month, suggests a pick-up in spending. US stocks fell, while prices for US government debt rose on the hiring and manufacturing reports.
The dollar slipped against a basket of currencies.
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