After recovering strongly as widespread vaccinations allowed for the lifting of pandemic restrictions, hiring by American firms slowed sharply in July, according to data released Wednesday by payroll services firm ADP.
The setback comes as President Joe Biden’s infrastructure and jobs plan nears approval in Congress, while he continues to push for massive spending on programs to support the economic recovery.
The 330,000 private jobs added last month was far smaller than economists had expected and less than half of the 680,000 positions gained in June, with big drops in the construction and leisure and hospitality sectors, according to the report.
That could be a worrisome sign ahead of the government’s monthly jobs report due out Friday, which economists expect could finally deliver another million-job increase.
“The labor market recovery continues to exhibit uneven progress, but progress nonetheless,” ADP chief economist Nela Richardson said in a statement.
As pandemic restrictions have eased, allowing businesses like hotels and restaurants to reopen, the hard-hit leisure and hospitality sector has been hiring workers at a brisk pace since March.
But the ADP report showed a gain of just 139,000 jobs last month — the biggest of any sector by far but less than half of June’s figures.
In recent weeks, rising infections from the fast-spreading Delta variant of Covid-19 have created uncertainty and caused some areas of the United States to again put in place mask-wearing rules, raising concerns about the economic rebound.
Treasury Secretary Janet Yellen said Wednesday there are longer-term “destructive forces” at work in the labor market, including racial disparities that government spending can help address.
On top of his $1 trillion infrastructure plan, Biden has proposed $3.5 trillion in spending on child care, education and health.
“In the same way that ambitious fiscal policy is accelerating our recovery from the pandemic, it can start unwinding some of these destructive trends and spur growth,” Yellen said in remarks prepared for delivery at an event in Atlanta where she is promoting Biden’s agenda.
The infrastructure plan “is just the beginning. We need to make child care more accessible and housing more affordable.”
– Hiring bottlenecks –
Economists are projecting employment gains of over 900,000 and as much as a million in the key Labor Department report, and though the ADP data are not always in sync with the official figures, the big miss could foretell weak monthly hiring overall.
The hiring slowdown will foment the narrative that the US economy has reached “peak growth,” said Briefing.com analyst Patrick O’Hare.
In the dominant US services sector, hiring weakened in the trade, transportation and utilities professions, and in healthcare and education, while manufacturing added just 8,000 jobs and construction 1,000 following four months of double-digit gains.
“The slowdown in the recovery has also impacted companies of all sizes. Bottlenecks in hiring continue to hold back stronger gains, particularly in light of new COVID-19 concerns tied to viral variants,” Richardson said.
“These barriers should ebb in coming months, with stronger monthly gains ahead as a result.”
Rubeela Farooqi of High Frequency Economics noted the weakness in the ADP report, but predicted employment would soon accelerate “as the factors that are restraining labor supply presently — health concerns, child care, supplemental unemployment benefits — ease.”