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Businesses added 163,000 jobs in August, payroll processor ADP said Thursday, possibly signaling the government’s employment report this week will show tepid gains for a second straight month.
Economists expected ADP to tally a healthy 200,000 new private-sector jobs, according to a Bloomberg survey. They estimate the Labor Department on Friday will count 195,000 payroll gains in the public and private sectors.
Jim O’Sullivan, chief U.S. economist of High Frequency Economics, expects Labor to report lackluster additions because of its tendency to make low initial estimates for August that it subsequently revises higher.
Hiring is volatile in late summer because of the start of the school year, making it challenging to seasonally adjust the figures. ADP, which tracks business employment only, is less susceptible to such vagaries.
What it means
ADP tries to predict Labor’s private-sector job totals but often varies from it significantly. In July, ADP reported 219,000 private-sector employment gain, compared to Labor’s 170,000.
Overall, hiring has been surprisingly strong this year despite an unemployment rate that has dipped below 4% and is increasingly triggering labor shortages. Monthly job growth has averaged 215,000 through July, Labor figures show, up from 182,020 in 2017. Some economists expect payroll gains to slow in the second half of the year as worker shortages worsen and the fallout from the Trump administration’s trade war deepens.
“Two soft months don’t prove anything, and even if the trend in payroll growth really has dipped, the problem right now looks more likely to be lack of labor supply rather than waning demand,” says Ian Shepherdson, chief economist of Pantheon Macroeconomics.
Industries that are hiring
Professional and business services led the job gains with 38,000; education and health care added 31,000; leisure and hospitality, 25,000; and trade, transportation and utilities, 21,000. Manufacturers added 19,000 jobs as a strong U.S. economy and plentiful U.S. oil drilling continue to drive production. Construction added 5,000.
Midsize businesses lead
Small businesses added 21,000 jobs; midsize companies, 111,000; and large ones, 31,000.
Small firms have struggled to compete for workers with larger companies that can offer better pay and benefits. Last month, midsize companies far outpaced both small and large businesses in hiring.
“Midsized businesses continue to be the engine of growth, adding nearly 70 percent of all jobs this month, and remain resilient in the current economic climate,” says Ahu Yildirmaz, vice president of the ADP Research Institute.
