Employers in the private sector added 119,000 jobs from March to April, according to seasonally adjusted figures released Wednesday by payroll giant ADP, in the latest disappointing sign of employment activity.
ADP also revised downward the employment gains from February to March, from the originally reported gain of 209,000 down to a revised estimate of 201,000 (see
Of the 119,000 jobs added in April, 58,000 were in small businesses of between one and 49 employees, 57,000 were in midsize businesses of between 50 and 499 employees, and 4,000 were in large businesses of 500 employees or more.
Most of the gains came in the service-providing sector, which added 123,000 jobs, but the goods-producing sector lost 4,000 jobs. The manufacturing industry lost 5,000 jobs, the first drop since last September. The construction industry also lost 5,000 jobs, the first loss in seven months and following healthy gains during the unusually warm winter months. However, that was offset by a gain in the mining sector.
On the plus side, the financial services sector added 13,000 jobs in April following a gain of 8,000 jobs in March.
“The financial sector is gradually recovering from the recession,” said Joel Prakken, chairman of Macroeconomic Advisers, which compiles the monthly employment report with ADP. “You can see this partly by looking at other indications of financial activity. First of all, bank willingness to lend has really strengthened in the last two or three quarters. We know from the actual data on consumer and business loans that credit is expanding. At some point you have to start hiring more people to handle the increasing volume of credit that the banks are willing to supply in this economy. I think that’s probably the main thing that’s going on there. There was a huge contraction after the Great Recession in the financial sector. A lot of that was in the mortgage-related part of the business, but it wasn’t all in that part of the business. While mortgage lending, I think, is still very slow to be coming back, other kinds of lending activity have really picked up. You need people to originate and service those loans, so you’re seeing some build back there, and I think it’s a good thing.”
Among the 58,000 jobs added at small businesses, the service sector gained 59,000 jobs, while the goods-producing sector lost 1,000 jobs.
Overall the report indicated surprisingly weak numbers, according to Prakken. The gain of 119,000 jobs was well below analyst expectations of 162,000 jobs added. The U.S. Bureau of Labor Statistics is scheduled to deliver the government’s official employment figures on Friday, which are forecast to be around 160,000 to 170,000.
“I think this number is going to cause some excitement, and it likely will fuel speculation that the economy has downshifted,” said Prakken.
However, he added that he does not expect to revise down his forecasts for economic growth this year. “We’re not going to over-react to this disappointing number today,” said Prakken. “Last winter was unusually warm. All the way through March there were record-setting temperatures across the United States. There is a fairly substantial body of analysis from Street analysts and ourselves to suggest that, over the winter months, private employment was boosted by perhaps as much as 70,000 cumulatively as we had three warm months in a row. It would be natural then that in the spring, that excess would bleed off through the seasonal adjustment process.”
Thus, while construction employment grew by 13,000 in March, it decreased by 5,000 in April. Prakken noted that the expiration of some tax breaks also may have contributed to the numbers.
“Business spending was weak, but you’ll recall that 100 percent expensing provisions expired on December 31, so there was incentive for firms to pull forward purchases of equipment and software into the end of last year, and in the process create a little bit of a crater in the first part of this year just to beat the tax deadline,” he said. “It’s quite likely, we think, that the unexpected weakness in investment spending is partly a result of this tax timing and could revive later in the year.”
He added that government spending also fell sharply in the early part of the year, but he expects that the money that has already been budgeted by governments will be spent before the end of the fiscal year.
Overall, though, the employment numbers in April fell far short of the 300,000 to 400,000 jobs that would need to be gained each month before the economy shows signs of a robust recovery.
