Hiring at service firms slows in March, still up

WASHINGTON — Hiring slowed in March nationwide among service firms and private employers, separate reports released Wednesday show.

The Institute for Supply Management said that its index of nonmanufacturing activity fell to 54.4 last month. That’s down from 56 in February and is the lowest in seven months. Readings above 50 signal expansion.

Slower hiring and a steep drop in new orders drove the index down. A gauge of hiring fell 3.9 points to 53.3, the lowest since November. That means companies kept hiring, just at a slower pace.

The ISM report covers companies that employ roughly 90 percent of the work force.

A separate report from payroll processor ADP also pointed to slightly weaker hiring in March. ADP said private employers added 158,000 jobs in March, down from 237,000 the previous month. Construction f irms didn’t add any jobs after three months of solid gains.

Economists were not overly concerned with the weaker reports. Several noted that ADP’s figures are less reliable than the government’s more comprehensive jobs report, which comes out Friday.

Still, most say the pace of hiring has almost certainly dropped off from the previous four months, when employers added an average of 200,000 net jobs a month.

Jim O’Sullivan, chief U. S. economist at High Frequency Economics, now expects just 160,000 net jobs, instead of 215,000. Jennifer Lee, an economist at BMO Capital Markets, said her group has lowered its forecast to 155,000, down from 220,000.

Lee said businesses may have temporarily suspended hiring because they want to see the impact of $85 billion in government spending cuts, which began on March. 1.

“It appears that businesses aren’t seeing the impact (of the spending cuts) just yet but are obviously concerned about the economy going forward ... and are thus holding back on orders or hiring,” Lee said in a note to clients.

Still, most economists say any slowdown is likely temporary. Most say growth accelerated in the January-March quarter to a 3 percent annual rate, buoyed by consumer spending and a steady rebound in housing.

“For now, there is still a lot of good news on the economy,” said Paul Edelstein, an economist at IHS Global Insight. “Home construction and demand are growing, and jobs are being added.”

Even with March’s decline in the service-sector growth, the index nearly matched its 12-month average of 54.5.

Another report on Wednesday showed home prices rose 10.2 percent in February compared to a year earlier.

Prices have now increased on an annual basis for 12 straight months.