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U.S. private payrolls miss expectations as COVID-19 infections spread

Published Dec 02, 2020 08:32AM ET Updated Dec 02, 2020 03:06PM ET
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2/2 © Reuters. FILE PHOTO: Thousands line up outside unemployment office in Frankfort 2/2
 
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By Lucia Mutikani

WASHINGTON (Reuters) - U.S. private payrolls increased less than expected in November as soaring new COVID-19 infections led to a wave of business restrictions, adding to signs of slowing economic activity as a turbulent year winds down.

The slowdown in private hiring in the ADP National Employment Report on Wednesday puts pressure on Congress to agree on additional fiscal stimulus to aid the recovery from the worst recession since the Great Depression.

Republicans and Democrats in Congress remained unable to reach agreement on a fresh relief package on Wednesday, with top Republicans supporting what the Senate's top Democrats dismissed as an "inadequate, partisan proposal."

President-elect Joe Biden will inherit a struggling labor market and public health crisis when he takes over from President Donald Trump on Jan. 20.

"The rapid spread of the virus across the nation is making it harder to find employment this fall and this puts the entire economic recovery from recession in jeopardy if Congress can't get it together and vote on a new stimulus package before the end of the year," said Chris Rupkey, chief economist at MUFG in New York.

Private payrolls rose by 307,000 jobs last month after increasing 404,000 in October. Economists polled by Reuters had forecast private payrolls would rise by 410,000 in November. The slowdown in hiring last month was across all industries.

The leisure and hospitality sector, hardest hit by the coronavirus pandemic, added 95,000 jobs. Construction employment increased by 22,000 jobs and manufacturers hired 8,000 workers. There were employment gains in financial activities, professional services, education and healthcare sectors. The information industry added no jobs.

The United States has been slammed by a fresh wave of COVID-19 infections, with 4.2 million new cases and more than 35,000 coronavirus-related deaths reported in November, according to a Reuters tally of official data.

The resurgence in coronavirus infections and expiring fiscal stimulus are hampering consumer spending and production at factories. More than $3 trillion in government COVID-19 relief helped millions of unemployed Americans cover daily expenses and companies keep workers on payrolls, leading to record economic growth in the third quarter.

New York Federal Reserve Bank President John Williams (NYSE:WMB) on Wednesday acknowledged growth was slowing due to the spreading COVID-19 cases and lack of more fiscal stimulus.

That sentiment was also evident in the Federal Reserve's Beige Book report of anecdotal information on business activity collected from contacts across the nation, which described the economic expansion as "modest or moderate."

The U.S. central bank noted four districts described little or no growth.

U.S. stocks were muted. The dollar slipped against a basket of currencies. U.S. Treasury prices fell.

LOSING STEAM

The ADP report is jointly developed with Moody's (NYSE:MCO) Analytics. Though it has fallen short of the government's private payrolls count since May because of methodology differences, it is still watched for clues on the labor market's health.

"The broad message from the ADP report is consistent with what we expect the government data to show, the labor market continued to add jobs on net in November but the pace of job growth slowed," said Daniel Silver, an economist at JPMorgan (NYSE:JPM) in New York.

The ADP report was released ahead of the government's closely watched, and comprehensive, monthly employment report on Friday. According to a Reuters survey of economists, private nonfarm payrolls likely increased by 589,000 jobs in November after rising 906,000 in October.

With government payrolls expected to have declined again last month as temporary workers hired for the Census left and state and local government struggle with weakened budgets, overall nonfarm payrolls are forecast increasing by 486,000 jobs after rising 638,000 in October.

That would the smallest gain since the jobs recovery started in May and leave employment 9.609 million below its peak in February. Job growth peaked at a record 4.781 million in June.

Authorities across the country have imposed new restrictions on businesses and other places where crowds congregate. While the measures are not as tough as in March when the coronavirus pandemic started in the United States, they have had a chilling effect on the labor market.

First-time applications for unemployment benefits have increased for two straight weeks. Data from Homebase, a payroll scheduling and tracking company, showed a decline in the number of employees working in November compared to October.

A survey from the Institute for Supply Management on Tuesday showed its measure of factory employment contracted in November after expanding in October for the first time since July 2019. Manufacturers cited high rates of absenteeism and difficulties returning people to work and hiring staff due to COVID-19.

The economy grew at a historic 33.1% annualized rate in the third quarter after shrinking at a 31.4% rate in the April-June period, the deepest since the government started keeping records in 1947. Growth estimates for the fourth quarter are mostly below 5%.

U.S. private payrolls miss expectations as COVID-19 infections spread
 

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Comments (1)
Steven ML
Steven ML Dec 02, 2020 3:19PM ET
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many expectations missed today, yet markets are in a positive mood. Hmmm.....
John Healy
John Healy Dec 02, 2020 3:19PM ET
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The markets are flying high on the $3T dollar, near-zero percent liquidity injection...with more on the way. It’s all one big party, but in a few months everyone will wake up with a massive hang over.
 
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