Job creation in private companies collapsed in July as fears increased over the spreading Covid-19 Delta variant, payroll firm ADP reported on Wednesday.
Employers added 330,000 jobs for the month, a sharp slowdown from June’s revised downward of 680,000. It’s also well below the Dow Jones estimate of 653,000. The final total for June fell from the original estimate of 692,000.
The increase in jobs in July was also the lowest increase since February.
“The recovery in the labor market continues to show inconsistent progress, but progress nonetheless,” said ADP chief economist Nela Richardson. “July payroll data shows a significant slowdown in employment growth from the pace of the second quarter.”
Markets fell on the report, with Dow futures falling nearly 120 points and yields on most government bonds falling.
According to the ADP, the largest increases in employment were again in the leisure and hospitality industries in July, adding 139,000 payrolls. Education and health services added 64,000 while professional and business services increased 36,000.
The goods manufacturing industry contributes only 12,000, the manufacturing industry more than 8,000. Natural resources and mining increased by 3,000, and construction only added 1,000 new jobs.
An ‘We’re hiring!’ The sign will be displayed in a Starbucks on Hollywood Boulevard on June 23, 2021 in Los Angeles, California.
Mario Tama | Getty Images
In terms of size, companies with 50 to 499 employees have created 132,000 jobs. Larger companies added 106,000 while the number of employees in small businesses rose by 91,000.
The ADP count, conducted in collaboration with Moody’s Analytics, is done two days prior to the release of the more closely monitored payrolls from the Department of Labor outside of agriculture. The two reports can be vastly different, but this year they are pretty close: through June, ADP had averaged about 30,000 fewer jobs per month than official government bills.
Unlike ADP, the Department of Labor’s census includes government agencies and is projected to add 845,000 overall after rising from 850,000 in June.
The disappointment comes from concerns that the spreading delta variant might add to an overall climate that suggests the post-recession economic boom is slowing. Although the spread of the variant is largely concentrated in a handful of states where vaccinations are low, the total number of cases has dwarfed the peak of the original Covid spread and raises fears that activity will be slowed.
The economy is also in the midst of an aggressive wave of inflation, although economists and policy makers largely view current factors as temporary and likely to subside in the future.
“Hiring bottlenecks continue to hold back stronger gains, especially in light of new COVID-19 concerns related to viral variants. Those barriers should ease in the coming months, which will lead to stronger monthly gains, ”said Richardson.
Federal Reserve officials have taken up the transition issue but promised to keep monetary policy loose and interest rates low until employment shows greater progress.
Fed Governor Christopher Waller told CNBC on Monday that he was ready to slow the pace of central bank bond purchases if employment reports are strong in August and September.
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