The labor market’s growth slowed again in April, according to today’s ADP Employment Report. The 119,000 net gain in private payrolls last month is the smallest increase since last September. It's also a sign for expecting that Friday’s official jobs report from the federal government will also reflect a tepid rise in the pace of hiring.
“Job growth appears to be slowing in response to very significant fiscal headwinds,” Mark Zandi, chief economist of Moody’s Analytics, says in a press release that accompanied today’s ADP report. “Tax increases and government spending cuts are beginning to hit the job market. Job growth has slowed across all industries and most significantly among companies that employ between 20 and 499 workers.”
ADP data also shows that the monthly growth rate for payrolls peaked last November and has been trending lower ever since. The sluggish pace raises questions about the economy’s strength. The economic news for March was mixed, in contrast to the relatively upbeat numbers in the first two months of the year. Today’s ADP release suggests that the wobbly data in March has spilled over into April.
Although the monthly payrolls numbers are suffering these days, the view from the perspective of weekly initial jobless claims still looks encouraging. New filings for unemployment benefits dropped last week, near a five-year-low. Is the claims data misleading us? Or is the labor market stronger than the monthly payrolls data implies? It’s unclear at this point, but the mystery won’t last long. Either the claims or payrolls numbers will eventually give way and confirm the other dataset’s trend. When might that moment of enlightenment arrive? Tomorrow, perhaps, when the Labor Department releases the new weekly claims report.