Market Wrap – More weak US economic data

Markets reacted to more weakening data in the United States as private sector jobs data showed a notable slowdown in hiring, while ISM services data dipped.

The US dollar continued to fall in the wake of the soft economic data and stocks declined, while the price of gold continued to march on towards new highs, close to $2,030.

Private businesses in the US created 145,000 jobs in March of 2023, below an upwardly revised 261,000 in February and forecasts of 200,000, in a sign the labour market is slowing as consumer demand ebbs and the cost of borrowing goes up.

The services sector added 75,000 jobs, led by leisure and hospitality, trade/transportations and utilities, and education/health services, while job losses occurred in financial activities, professional/business industry, and information. 

Meanwhile, the goods-producing industry added 70,000 jobs due to construction and mining while manufacturing shed 30,000 jobs.

Large establishments created 10,000 jobs only and medium ones 33,000 while small-sized companies 101,000 jobs. Annual pay growth for those remaining in their jobs slowed to 6.9%, the lowest in over a year.

Nela Richardson, chief economist, ADP said “Employers are pulling back from a year of strong hiring and pay growth, after a three-month plateau, is inching down”.

The ISM Services PMI fell to 51.2 in March of 2023 from 55.1 in February and well below forecasts of 54.5, pointing to further signs of an economy going the wrong way.

The reading pointed to the slowest growth in the services sector in three months, amid a cooling off in the new orders growth rate, an employment environment that varies by industry, continued improvements in capacity and logistics, and a positive impact on supplier performance.

In March, there was a slowdown in business activity (55.4 vs 56.3), new orders (52.2 vs 62.6) and employment (51.3 vs 54) while backlog of orders moved to contraction (48.5 vs 52.8). Meanwhile, inventories grew faster (52.8 vs 50.6) and price pressures eased (59.5 vs 65.6). Supplier deliveries registered 45.8 percent, below 47.6 percent in February.

In the last two months, the index has reflected the fastest supplier delivery performance since April of 2009. Meanwhile, the majority of companies see a positive outlook on business conditions.