UPDATE 2-Hiring at U.S. companies in March slowest in five months

Wed Apr 3, 2013 3:00pm BST

NEW YORK, April 3 (Reuters) - U.S. companies hired at the slowest pace in five months in March as recent strong demand for construction jobs evaporated, a report by a payrolls processor showed on Wednesday.

The ADP National Employment Report said private employers added 158,000 jobs last month, falling short of economists' expectations for 200,000. The report came in below the lowest estimates in a poll by Reuters and was the smallest gain since October.

Revisions to February's jobs gains were more positive, with the private payrolls figure raised to an increase of 237,000 from the previously reported 198,000, although January was revised down to 177,000 from 215,000.

March's pullback was largely due to construction jobs flatlining after showing strength in recent months, said Mark Zandi, chief economist for Moody's Analytics. There were zero new construction jobs in March.

Recent monthly gains in the sector have averaged about 35,000, Zandi said, as the housing recovery has gained traction. Hiring may also have been boosted in the short-term by rebuilding efforts following the massive storm that hit the U.S. northeast in the fall of last year, he said.

"If that's the case, underlying job growth is not changed appreciably," said Zandi, estimating overall employment growth is running at around 175,000 a month.

Small businesses led March's employment gains as companies with less than 50 employees added 74,000 jobs. Companies with less than 500 employees created 37,000 positions, while larger firms with more than 500 people on their payrolls added 47,000 jobs.

The ADP report, which is jointly developed with Moody's Analytics, comes ahead of the government's more comprehensive labor market report on Friday.

That report includes both public and private sector employment and is expected to show a gain in overall nonfarm payrolls of 200,000 last month, while the unemployment rate is seen holding steady at 7.7 percent.

Economists said the ADP report could add some downside risk to their forecasts for Friday's number, though ADP is not always accurate in predicting the outcome.

"It tilts the risk in that (weaker) direction for Friday's payroll numbers," Jim O'Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York, said of the ADP report.

"It doesn't mean the trend of job growth has suddenly slowed, but that's what people are worried about."