The sharp slowdown in the pace of payroll gains is consistent with other data that show the labor market in danger of regressing after rebounding in the months immediately following the lifting of state lockdowns on businesses. Applications for unemployment benefits have risen for two straight weeks amid a spike in Covid-19 cases that has forced some rollbacks in reopening plans.
The ADP data precede the government’s jobs report on Friday, which is forecast to show private payrolls increased by 1.5 million in July after a 4.8 million gain a month earlier. At the same time, the initial ADP figures for May and June were significantly below the Labor Department’s official tallies.
“We have seen the slowdown impact businesses across all sizes and sectors,” Ahu Yildirmaz, co-head of the ADP Research Institute, said in a statement.
Stocks climbed for a fourth day. A separate report showed U.S. service industries expanded in July at the fastest pace since February 2019 as the strongest reading yet on orders and a pickup in business activity more than offset a bigger contraction in employment.
ADP said service-provider employment rose by 166,000, while payrolls at goods producers increased 1,000 in July. Employment in the leisure and hospitality industry, which had gained more than 3 million in the prior two months, rose just 38,000 in July.
Other recent job-market indicators “have sort of flat-lined over the past month, and that told us that there’s probably some slowing in the labor recovery,” said Brett Ryan, senior U.S. economist at Deutsche Bank Securities Inc.
The ADP report showed payrolls at small businesses increased by 63,000 last month, while medium-size businesses shed 25,000 jobs. Payrolls climbed 129,000 at large firms.
ADP’s payroll data represent firms employing nearly 26 million workers in the U.S.
(Updates with services industry report in sixth paragraph.)
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