Job creation at private companies tumbled in July as fears mounted over the spreading coronavirus delta variant, payroll processing firm ADP reported Wednesday.
Employers added 330,000 positions for the month, a sharp deceleration from the downwardly revised 680,000 in June and well below the 653,000 Dow Jones estimate. June’s final total fell from the initial estimate of 692,000.
July’s job growth was also the smallest gain since February.
“The labor market recovery continues to exhibit uneven progress, but progress nonetheless,” said Nela Richardson, chief economist at ADP. “July payroll data reports a marked slowdown from the second quarter pace in jobs growth.”
Markets fell after the report, with Dow futures down nearly 120 points and most government bond yields negative on the session.
According to ADP, the biggest job gains for July again came in leisure and hospitality, which added 139,000. Education and health services added 64,000 while professional and business services increased by 36,000.
Goods-producing industries contribute just 12,000 to the total, with manufacturing up 8,000 while natural resources and mining gained 3,000 and construction added just 1,000 new positions.
From a size standpoint, companies with 50 to 499 employees added 132,000 jobs. Bigger firms added 106,000 while small business increased by 91,000.
The ADP count, done in conjunction with Moody’s Analytics, comes two days before the more closely watched Labor Department nonfarm payrolls release. The two reports can differ significantly but have been fairly close this year: Through June, ADP had averaged about 30,000 fewer jobs a month than the official government tally.
Unlike ADP, the Labor Department’s count includes government jobs and is expected to show a total gain of 845,000 after June’s 850,000 increase.
The letdown comes amid concerns that the spreading delta variant could contribute to an overall climate that indicates the post-recession economic boom is slowing. Though the variant’s spread is largely concentrated among a handful of states where vaccinations are low, the total case count has eclipsed the peak of the original Covid-19 spread and is sparking worries that it will slow activity.
The economy also is in the throes of an aggressive inflation wave, though economists and policymakers largely see the current factors as temporary and likely to ease ahead.
“Bottlenecks in hiring continue to hold back stronger gains, particularly in light of new COVID-19 concerns tied to viral variants. These barriers should ebb in coming months, with stronger monthly gains ahead as a result,” Richardson said.
Federal Reserve officials have echoed the transitory theme but have vowed to keep monetary policy loose and interest rates low until the employment picture shows greater progress.
Fed Governor Christopher Waller told CNBC on Monday he would be willing to start reducing the pace of the central bank’s asset purchases if the August and September jobs reports are strong.
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Source: Economy - cnbc.com
