By Geoffrey Smith
Investing.com -- The U.S. labor market continued its rapid recovery from the Covid-19 pandemic in April, although a closely-watched survey suggested its progress was slightly weaker than expected.
Payrolls processor ADP said 742,000 people found nonfarm jobs in the private sector last month, the strongest monthly gain since September. The number was some 58,000 below expectations, albeit the previous month’s number was revised up by 48,000 to 565,000.
Net of revisions, the figure is only marginally below consensus forecasts and unlikely to change many market opinions on the pace of the U.S. economy’s recovery.
ADP’s figures come two days before the government’s official labor market report for the month through mid-April, a period in which dozens of states were relaxing restrictions on businesses in response to falling infection rates for Covid-19. Anecdotal reports suggest that the hospitality sector in particular has been quick to rehire. According to ADP, the hospitality accounted for 237,000 of the net jobs added.
At the same time, the Institute of Supply Management’s employment index for the manufacturing sector returned to a level last seen before Donald Trump stepped up his trade war with China in 2018. The ISM’s employment index continued to indicate robust job growth this month, but at a slightly slower pace.
The generally close correlation between ADP numbers and the government's numbers weakened markedly during the pandemic, but the numbers are still widely seen as a good proxy for overall trends in the labor market. The Labor Department is expected to announce on Friday that the economy overall added 978,000 jobs during the month through mid-April, up from 916,000 the previous month.
The Federal Reserve, which has made the labor market the labor market recovery the most important factor in its formulation of monetary policy, estimates that the economy is still currently more than eight million jobs short of its pre-pandemic level.
"ADP has tended to understate the official payroll numbers since the middle of last year, so this reading is consistent with a headline number Friday of about 1.1 million," said Ian Shepherdson, chief economist with Pantheon Macroeconomics in a note to clients. "That would be a welcome uptick from the 916K increase in March, but the best is yet to come; we look for much bigger gains in May and - especially - June and July, by which point we expect the whole economy to be fully open."