ADP Payrolls Show Sharp Slowdown in Private-Sector Hiring in April

© Reuters.

By Geoffrey Smith 

Investing.com -- The U.S. labor market showed signs of slowing in April as labor shortages increasingly affected businesses across the country, fresh data showed on Wednesday.

Private-sector payrolls rose by only 247,000 in the month through mid-April, the smallest gain in over a year, and a sharp slowdown from an upwardly-revised 479,000 in March, according to a monthly survey by payrolls processor ADP. The number was also well below consensus forecasts for a gain of 395,000.

“In April, the labor market recovery showed signs of slowing as the economy approaches full employment,” said ADP chief economist Nela Richardson in a statement accompanying the release. “While hiring demand remains strong, labor supply shortages caused job gains to soften for both goods producers and services providers. As the labor market tightens, small companies, with fewer than 50 employees, struggle with competition for wages amid increased costs.”

The news adds to signs of the economy starting to slow as it suffers from raging inflation, coming only days after a surprisingly weak first-quarter report for gross domestic product. That report had shown signs of consumer demand moderating amid widespread price rises and the drawdown of pandemic-era savings. 

ADP's news comes on the same day that the Federal Reserve is expected to announce its biggest interest rate hike in 20 years. Analysts predict it will raise the target range for the fed funds rate by 50 basis points to 0.75%-1.0%.

The survey suggested that small businesses in particular are struggling to hire staff, at a time when employees are leaving their jobs for higher-paying ones in record numbers.

According to the Labor Department’s monthly Job Openings and Labor Turnover survey, some 4.5 million Americans quit their jobs last month, the most ever.

ADP’s survey indicated that firms with 50 employees or fewer actually shed a net 121,000 jobs last month, while all the net growth in employment was accounted for by firms with over 1,000 workers.

The historical correlation between ADP's report and the Labor Department's official employment numbers has weakened considerably since the start of the pandemic. However, the numbers may be seen by some as a bad omen for the official employment report on Friday. Analysts expect overall nonfarm employment to have risen by 385,000 last month, and the jobless rate to have ticked down to 3.5% from 3.6%.