U.S. companies created far fewer jobs than expected in August as the Covid resurgence was accompanied by staff cuts, according to a report by payroll service provider ADP on Wednesday.
The number of private employees rose by just 374,000 during the month, well below the Dow Jones estimate of 600,000 but above the 326,000 from July, which was revised down slightly from the initial 330,000 points.
Most of the new jobs came from the leisure and hospitality industry, which added 201,000 jobs, a somewhat hopeful sign that a labor shortage-stricken industry is continuing to recover.
Education and health services added together to add 59,000 for the month as hospitals in some parts of the country were inundated with virus cases and schools reopen.
“The delta variant of COVID-19 appears to have hurt the labor market recovery,” said Mark Zandi, chief economist at Moody’s Analytics, who worked with ADP on the report. “Employment growth remains strong, but well below the pace of recent months. The growth in employment remains inextricably linked to the path of the pandemic. “
The apparent disappointment comes at a crucial time.
After a robust rebound from the shortest but steepest recession in US history, economic data has been disappointing lately and may reflect setbacks in the summer surge in the Covid Delta variant. The US is seeing an average of about 150,000 new cases per day following an outbreak in July and August.
The markets are waiting for Friday’s non-farm payroll report, which Dow Jones estimates should show 720,000 new jobs and an unemployment rate of 5.2%.
Wall Street initially shrugged at the ADP report, as stock market futures were still pointing to a higher open. However, the key averages in late morning trading were mixed and government bond yields hardly changed.
Differences between number of jobs
The ADP numbers could point to a softer report from the Department of Labor, although the company’s 2021 number was an unreliable indicator.
ADP’s balance sheet showed an average growth of 495,000 jobs per month through July; the work report showed an average increase of 617,000 over this period. The two reports also differed widely in July, with the official figure at 943,000, compared to 326,000 by ADP.
Goldman Sachs said the ADP report “suggests potential drawbacks” for Friday’s Bureau of Labor Statistics figure. Goldman is already forecasting employment growth of 600,000, which is below consensus.
According to ADP, the weakest job growth in August was in small businesses, adding just 86,000 jobs. Companies with 50 to 499 employees led with 149,000, while large companies contributed 138,000.
At the sector level, services totaled 329,000, with professional and business services growing 19,000 and commerce, transportation and utilities growing 18,000.
Of the 45,000 jobs in goods production, 30,000 were in construction, 9,000 in natural resources and mining, and 6,000 in manufacturing.
Federal Reserve officials are closely monitoring the job numbers.
Recent statements from the central bank suggest that it is likely to slow the pace of its monthly bond purchases as long as employment growth continues. Officials were broadly optimistic about the employment situation, but note that there are currently around 6 million fewer jobs than before the pandemic.
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