Private sector added 167,000 jobs in July, says ADP

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Employment in the private sector increased by 167,000 jobs from June to July, according to payroll giant ADP, despite the millions of unemployment claims being filed in recent weeks, with job losses concentrated in medium-size businesses as a result of the novel coronavirus pandemic.

Small businesses gained 63,000 jobs in July, according to the ADP National Employment Report, including 45,000 in businesses with between one and 19 employees and 18,000 in companies with between 20 and 49 employees. In contrast, medium businesses with between 50 and 499 employees lost 25,000 employees. Large businesses gained 129,000 employees, including 19,000 in companies with between 500 and 999 employees, and 111,000 in larger companies with 1,000 employees or more.

The service sector added 166,000 jobs, including 58,000 in professional and business services such as accounting and tax preparation, although the financial activities sector lost 18,000 jobs in industries such as banking. The goods-producing sector, in contrast, added only 1,000 jobs, mostly in the manufacturing industry, which added 10,000 jobs, offset by losses of 8,000 jobs in the construction sector and 1,000 in natural resources and mining. Franchise employment increased by 21,200 jobs.

"The labor market recovery slowed in the month of July," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, in a statement Wednesday. "We have seen the slowdown impact businesses across all sizes and sectors."

Mark Zandi, chief economist at Moody’s Analytics, which compiles the monthly employment report with ADP, noted that job growth slowed sharply in July after big gains in June and May. “With the small July gain, private sector employment is still 13 million jobs, or about 10 percent, below its pre-pandemic February peak, so we made some progress regaining the jobs we lost, but that we have a long way to go,” he said during a conference call with reporters Wednesday. “The slowing in job growth in the ADP data was broad based across every sector. Sectors like leisure and hospitality, retail, health care — the industries that are on the front lines of the pandemic — saw some big gains in May and June, and as businesses reopened too quickly, experienced much smaller employment gains in July. We had a number of sectors with layoffs or reduced payrolls. Energy — no surprise there, that’s been ongoing — financial services, information services, all showing some weakness.“

He noted that weakness was most pronounced among smaller companies. “The small overall gain in the ADP data of 167K is consistent with the plethora of other labor market data that we have available at this point for the month of July,” said Zandi.

He pointed out that the number of initial unemployment claims have been coming down, but they’re still over 2 million per week. When the U.S. Bureau of Labor Statistics jobs report comes out on Friday, he predicts a gain of 750,000 jobs, largely due to gains in local government jobs as schools start to reopen. For August, he predicts a large gain in federal government jobs as temporary census takers are hired, but will fall off in September.

A key reason for the falloff in the July employment data, according to Zandi, is the winding down of the Paycheck Protection Program, which was put in place as part of the CARES Act to provide funds for smaller companies with fewer than 500 employees.

“These were loans turned into grants if the money was used to help support payrolls,” he said. “That program disbursed a lot of money, close to $600 billion, to small businesses. But many of the businesses who took that money early in the pandemic now have largely spent it. With the pullback on reopenings in some parts of the country, they don’t have the resources to continue paying their employees. Providing more funds to the PPP, and other mechanisms for trying to support the labor market, like the Employee Retention Tax Credit, those things are being negotiated between Congress and the Trump administration as part of the next fiscal rescue package. We’ll see how that goes. But the fact that money is running out is having an impact on the labor market.”

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Payroll ADP Coronavirus Moody's Analytics Mark Zandi
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