ADP reported Wednesday that private sector employers added 169,000 jobs in April, as low oil prices and a strong dollar slowed down the hiring pace.
Small businesses added 94,000 jobs in April, down from 105,000 in March. The total included 54,000 at businesses with between one and 19 employees and 40,000 at businesses with 20 to 49 employees.
Midsize businesses with between 50 and 499 employees gained 70,000 jobs in April, up from 64,000 in March.
Large businesses added 5,000 jobs in April, all of them at businesses with 1,000 employees or more, an improvement from the 4,000 added in March. Companies with 500 to 999 employees added virtually no jobs, according to ADP, after adding only 2,000 in March.
"April job gains came in under 200,000 for the second straight month,” said ADP president and CEO Carlos Rodriguez in a statement. “Companies with 500 or more employees had the slowest growth.”
Goods-producing employment declined by 1,000 jobs in April, down from the 3,000 jobs that were gained in March. The construction industry added 23,000 jobs, up from 21,000 in March. The manufacturing industry lost 10,000 jobs in April, after losing 3,000 in March.
Service-providing employment rose by 170,000 jobs in April, down slightly from 172,000 in March. The ADP National Employment Report indicates that the professional and business services sector, which includes accounting and tax services along with other types of services, contributed 34,000 jobs in April, up from 28,000 in March.
Expansion in the combined trade, transportation and utilities sector grew by 44,000, up from 41,000 in March. The 7,000 new jobs added in financial activities represented a drop from last month’s 12,000. Franchise businesses added 15,600 jobs in April, down from 20,000 added in March.
Mark Zandi, chief economist at Moody’s Analytics, which compiles the National Employment Report with ADP, blamed oil prices and the strong dollar for the job gains coming in below 200,000 again in April.
“The first is the ill effects of the collapse in oil prices,” he said in a conference call with reporters Wednesday. “That’s having a depressing effect on the energy sector. If you go back six or nine months ago there were roughly 2,000 active rigs out there searching for oil and gas. Today there are less than 1,000. That’s now showing up in the employment data. I think the job losses in the energy sector will continue through most of the summer. When it’s all said and done, I think the negative consequences of the lower oil prices will cost the economy, including the jobs lost in the energy sector, almost a quarter of a million jobs.”
Zandi pointed to the impact in the oil-producing parts of the country, particularly in Houston. “I do think, though, this is a one-time adjustment,” he added. “Therefore the consequences of the lost jobs will abate by late summer into fall. By the second half of the year we should see the benefits of the lower oil prices, particularly on consumer spending, showing up in retail activity and other types of service spending, and ultimately on jobs. By the end of the year and going into next, the net impact of the lower oil prices on the job market will be decidedly positive. But at this point in time, at least in the month of April, it’s a net negative, and that’s what we’re observing in the data.”
Another reason why the job gains were below 200,000 in April is the strong dollar. “The dollar has taken off, at least compared to where we were last year,” said Zandi. “On a broad, nominal, trade-weighted basis, the dollar is up about 15 percent against the euro and yen. That is a big change in a very short period of time. You can see the effects of that in the trade balance.”
The impact is showing up especially in manufacturing jobs. However, Zandi is seeing signs of a turnaround, with oil prices seeming to have bottomed out and starting to rise, while the euro and the yen have begun to bounce back. He is also seeing continued improvement in the housing market, which should add to construction industry jobs. While large multinational companies have taken a hit and slowed down their hiring pace, small businesses have benefited from the improving housing market and the drop in oil prices.
Wage growth has also picked up in the past two quarters and is around 2.5 percent. Zandi acknowledged that there is still a fair amount of slack in the labor market, but he predicts that the economy will be back to what is considered by economists to be “full employment” by the end of 2016 if the monthly job gains return to 200,000 or more, or by the end of 2017 if they stay in the 175,000 range.
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