U.S. private employers added back far fewer jobs than expected in August as the Delta variant’s spread began to take its toll on the pace of the labor market’s recovery.
Private payrolls rose by 374,000 in August, ADP said in its closely watched monthly report on Wednesday. Consensus economists were looking for private payrolls to grow by 625,000, according to Bloomberg data. In July, private sector jobs increased by 326,000, according to the firm’s revised monthly print.
By sector, high-contact service-providing areas again posted the biggest private payroll gains, with leisure and hospitality jobs rising by 201,000. This was followed by a wide margin by education and health services positions with a gain of 59,000 jobs. Professional and business services payrolls also rose by 19,000.
In the goods-producing sector, overall payrolls increased by 45,000, led by construction industries with job gains of 30,000. Mining and manufacturing jobs each also rose, but by much smaller sums.
“There are challenges ahead, but we’ve also seen an amazing economic recovery — a huge pick-up in business formation, financial liquidity is there and present,” Nela Richardson, ADP chief economist, told Yahoo Finance Live on Wednesday. “And in terms of ADP’s small business surveys, it’s hiring, not financing, that is the No. 1 challenge that we’re seeing our small business clients report. This is really a market that could thrive given economic conditions, but is limited by labor market bottlenecks and health conditions that aren’t certain.”
ADP’s report adds to a slew of mixed labor market data out for August, when a resurgence in COVID-19 cases began to stem the pace of the recovery after a strong start to the summer. Last week, IHS Markit’s latest purchasing managers’ indices showed that employment activity in both the domestic services and manufacturing sectors decelerated sharply in August. And consumer confidence indices have also retreated, raising the specter of a slowdown in hiring if consumers’ propensity to spend deteriorates and demand for goods and services pulls back.
Still, however, the overall trend in the data has pointed toward an ongoing, if slowing, recovery. The U.S. Labor Department’s “official” monthly jobs report on Friday is expected to reaffirm that message, with job growth still coming in well above pre-pandemic levels for August but pulling back compared to July.
Though the ADP private payrolls print has helped provide a general hint at the trajectory of hiring gains or losses, it has also been a typically imprecise indicator of the government report due to survey methodology differences. ADP counts active employees on company payrolls, while the Labor Department counts those paid during the survey period towards the headline jobs figures.
Last month, the Labor Department reported that 703,000 private payrolls came back in July, significantly outperforming against ADP’s 330,000 reported job gains in the firm’s preliminary print.
For August, consensus economists expect to see the Labor Department report that 748,000 total non-farm payrolls returned, with 652,000 of these comprising private payrolls. Job gains in July had totaled 943,000. The unemployment rate is expected to reach a fresh pandemic-era low of 5.2% in August, ticking down from July’s 5.4%.
The Labor Department is set to report its monthly jobs report Friday at 8:30 a.m. ET.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck