Disappointing economic data raised concerns that Friday's labor report will come in worse than expected, despite the Federal Reserve's supersized stimulus.
Private sector hiring cooled in March as the federal government launched $85 billion in "sequester" spending cuts over the next seven months in the face of congressional budget gridlock.
According to a report by payrolls processing firm ADP on Wednesday, private-sector employment rose by 158,000 jobs last month, the smallest increase in four months and well below the 197,000 expected by most analysts.
The ADP report came two days ahead of the Labor Department's jobs and unemployment data, a closely watched indicator of the health of the US economy.
Most analysts have penciled in US jobs growth of 192,000 in March, down from a February spike of 236,000. That would be close to the 191,000 average of the prior three months.
The unemployment rate was expected to hold unchanged at 7.7 percent for a second month amid a tepid economy that eked out only 0.4 percent growth in the 2012 fourth quarter.
Though economists view the ADP private-sector report as a spotty indicator of the Labor Department's monthly jobs numbers, the weakness in job creation in March raised eyebrows.
"The survey tends to be very good at picking up changes in trend, but there are often timing mismatches of a month or two between the surveys, so a weak number today does not guarantee a weak one on Friday," said Chris Low of FTN Financial.
The Institute for Supply Management's report on the service sector, which accounts for the lion's share of US economic activity and drives jobs creation, showed growth slowed more than expected in March.
The ISM non-manufacturing purchasing managers index fell to 54.4 from 56 in February. Most analysts had forecast the PMI reading would slip to 55.5.
"This may be foreshadowing a slightly weaker-than-expected payroll report on Friday," Briefing.com said.
Anthony Nieves, head of the ISM non-manufacturing survey committee, noted "an underlying concern regarding the uncertainty of the future economy."
Raising concern ahead of the Friday jobs report was the fact that a drop in employment -- by 3.9 percentage points -- was among the leading factors for the ADP slippage.
"The report shows weakness from soup to nuts. The employment gauge, while still relatively firm-valued, appears to be losing momentum," said Robert Brusca of FAO Economics.
The jobs market remains far from what the Federal Reserve regards as healthy enough to start easing the pedal on its third round of quantitative easing, an $85 billion a month bond-buying program known as QE3.
The Fed has indicated it would not tighten monetary policy until unemployment falls below 6.5 percent and inflation, currently well below the central bank's 2.0 percent comfort zone, tops 2.5 percent.
Fed Chairman Ben Bernanke has warned that the expiry of payroll tax cuts on January 1 and the sequestration spending cuts that began March 1 would deal a blow to the recovery and jobs growth.
Moody's Analytics predicted that average monthly jobs gains would slow to around 160,000 in the second quarter and would slow further in the third quarter.
Mother Nature may also wreak some havoc on Friday's numbers, which come after abnormally cold weather, said Aichi Amemiya of Nomura Global Economics.
"In addition to concerns over the sequestration, unfavorable weather could have weighed on the pace of job creation in March," particularly in the construction sector, the economist said.
His jobs gain estimate was a below-consensus 170,000 posts.
Brusca, of FAO Economics, warned that the latest signals suggested the US economy was facing a rougher road ahead.
"We shall soon be able to tell, as Friday is approaching fast. It's the only fast-moving thing in this whole economy at the moment," he said.