April 5, 2017 / 12:42 PM / in 4 months

U.S. companies hire most workers in over two years: ADP

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FILE PHOTO: People wait in line to attend TechFair LA, a technology job fair, in Los Angeles, California, U.S., January 26, 2017.Lucy Nicholson/File Photo

(Reuters) - U.S. companies added 263,000 workers in March, the most since December 2014, suggesting further tightening of the labor market, payrolls processor ADP said on Wednesday.

Strong job gains in the coming months will likely add upward pressure on wages, supporting the Federal Reserve's view for at least two more interest rate increases by the end of 2017.

"The labor market is tight and it will get tighter," said Mark Zandi, chief economist at Moody's Analytics which jointly developed the ADP National Employment Report.

ADP's March figure easily beat the median forecast of 187,000 increase among economists surveyed by Reuters.

Private payroll gains in the month earlier were revised down to 245,000 from the originally reported 298,000.

The ADP figures come ahead of the U.S. Labor Department's more comprehensive non-farm payrolls report on Friday, which includes both public and private-sector employment.

Economists polled by Reuters are looking for U.S. private payroll employment to have grown by 175,000 jobs in March, down from 227,000 the month before. Total non-farm employment is expected to have risen by 180,000.

The unemployment rate is forecast to stay steady at the 4.7 percent recorded a month earlier.

Wage growth has been running at a 2.5-3.0 percent year-over-year pace, which is modest by historical standards, Zandi said.

One factor that may lead to faster wage gains is the uncertainty on immigration policy. Stricter immigration as proposed by the Trump administration would reduce labor supply, forcing employers to compete for workers.

"The labor shortage might be exacerbated by immigration issues," Zandi said.

If immigration were cut in half, that could choke off domestic labor growth which is currently running at 3-4 percent a year, according to Zandi.

Reporting by Richard Leong; Editing by Meredith Mazzilli and Chizu Nomiyama

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