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The numbers: U.S. private-sector employment increased by 330,000 in July, according to the ADP National Employment report issued Wednesday. The increase was below the 653,000 jobs forecast by economists according to a Wall Street Journal poll.
The gain in July fell well short of the 680,000 new jobs added in June, which was revised lower from an initial estimate of 692,000.
Big Picture: The number indicates that job growth continues to lag expectations amid reports of labor shortages and a resurgent COVID-19 pandemic, and could lower expectations for the Labor Department’s employment report for June, set to be released Friday at 8:30 a.m. Eastern.
The consensus estimate for new economy-wide job gains in June is 845,000, according to the Journal poll of economists. If the Labor Department’s report falls short of expectations as well, the market could take it as a signal that the Federal Reserve will maintain its easy monetary policy for longer than previously expected. Fed Chairman Jerome Powell has cited labor-market weakness as the primary reason for continuing large-scale asset purchases and maintaining a near-zero fed funds rate.
What happened: Job gains were overwhelmingly concentrated in the service sector, with the leisure and hospitality industry adding 139,000 new jobs, and education and healthcare services growing employment by 64,000.
The goods producing sector saw sharp slowdowns in job growth, adding just 12,000 new jobs compared with an average of 78,000 jobs during the previous three months, according to ADP.
Job gains were evenly distributed among firms of all sizes, with small businesses adding 91,000 new positions, while medium-sized and large businesses added 132,000 and 106,000 new jobs, respectively.
What ADP said: “The labor market recovery still has legs, but it’s likely to be an uneven path forward,” Nela Richardson, chief economist at ADP told reporters at a press conference Wednesday. Unique factors related to the pandemic, including the “uncertain path of the delta variant and it’s effect on the U.S. reopening,” a lack of caregiving services in the summer months and labor shortages are the drivers of the uneven nature of this jobs recovery, she added.
Richardson pointed to survey data showing that businesses are having trouble finding workers to fill open positions, but noted that these labor shortages are likely to be temporary as unemployment assistance gets dialed back and many schools open in the fall.
What economists are saying: “Overall, job growth is set to pick up over coming months as the factors that are restraining labor supply presently – health concerns, child-care, supplemental unemployment benefits – ease,” wrote Rubeela Farooqi, chief U.S. economist at High Frequency economics. “In terms of the Fed, it is unclear how many more months of strengthening labor market conditions are needed to meet the Fed’s “substantial further progress” standard that will lead to a tapering of asset purchases. Our expectation is the FOMC would prefer to see the September data before making that assessment.”
Market reaction: Stock-index futures held to losses following the report, with the Dow Jones Industrial Average
DJIA,
the S&P 500
SPX,
and the Nasdaq
COMP,
all set to open lower at the start of trade.
