Goldman Shaken By ADP Number, Unstirred, As It Keeps Friday NFP Estimate At +275,000

Is there just a little trepidation in Jan Hatzius' typing as he reconfirms his +275,000 Friday NFP Target?

Downside Surprise Calls Private-Sector Hiring into Question

BOTTOM LINE: ADP report weaker than expected, showing a decline of 23k in March and raising questions about whether private-sector hiring has truly begun.

KEY NUMBERS:
ADP report says private-sector payrolls -23k in Mar vs median forecast +40k.

MAIN POINTS:
1. The ADP report on private-sector payrolls falls in March, coming in substantially weaker than expected. (The February number was revised down very slightly from -20k to -24k.) Employment at all firm sizes fell in March, with small firms showing a slightly bigger decline (-12k) than medium (-4k) and large companies (-7k). Employment losses were concentrated in goods producing sectors (-51k) and manufacturing (-9k), while employment in services rose (+28k).

2. With little evidence of weather effects in the ADP report, the slightly negative figures reported for February and March call into question the growing presumption that private-sector firms have turned the corner from job shedding to net hiring. Our forecast of +275k for Friday's report on nonfarm payrolls is based on this premise (an underlying increase of 50k, including non-Census government, plus another 100k for a weather rebound and 125k for temporary Census hires). We have not changed this estimate but will keep it under review, as we always do, pending more information on hiring (Conference Board and Monster), claims, and the ISM's mfg employment index.

Look for a late Thursday NFP revision out of Goldman, as tends to happen in contentuous situations.