American Businesses Cut Back on Hiring in July: ADP Jobs Report

A man wears a protective mask as he walks past a "Now Hiring" sign in front of a store amid the COVID-19 pandemic, in Arlington, Va., on May 14, 2020. (Olivier Douliery/AFP/Getty Images)

Businesses in the United States cut back sharply on hiring in July, suggesting the COVID-19 resurge was dampening enthusiasm among the nation’s private employers to onboard staff amid doubts about the sustainability of the economic rebound.

Private-sector employment surged by 4.3 million in June and 3.3 million in May, fueling hopes for a robust recovery, but payroll processor ADP’s newest report (pdf) shows the U.S. economy added an anemic 167,000 jobs in July.

“The ADP report reinforces our view that the economy has lost momentum in recent weeks following a period of strong growth,” said Daniel Silver, an economist at JPMorgan in New York.

July’s lackluster hiring means the economy still has 13 million fewer jobs than it did in February, according to ADP, before the COVID-19 outbreak intensified, sparking business shutdowns and throwing America’s economy into a tailspin.

The downbeat ADP jobs report comes as somewhat of a surprise, as economists polled by Reuters said they expected private payrolls to jump by 1.5 million in July.

“The economy will remain at risk of a renewed downturn so long as a vaccine or therapeutic for the virus remains out of reach,” said Oren Klachkin, lead U.S. economist at Oxford Economics in New York.

Several industries shed jobs in July, the ADP report shows, with financial activities leading the way with a loss of 18,000 jobs, followed by construction (18,000), IT (3,000), and natural resources and mining (1,000). Sectors with the biggest gains were professional/business services (58,000), education and health services (46,000), and the category of trade/transport/utilities (41,000). A category that includes restaurants, bars, and hotels added 38,000 jobs in July, after gaining more than 3 million in May and June combined.

People who lost their jobs wait in line to file for unemployment at an Arkansas Workforce Center in Fayetteville, Ark., on April 6, 2020. (Nick Oxford/Reuters)

Other data released on Aug. 5 showed that while activity in the services sector gained momentum in July, hiring declined. The Institute for Supply Management (ISM) said its services index surged to a reading of 58.1 in July, the highest since March 2019. A reading above 50 indicates growth, while a number below that means the category is in contraction. But the ISM’s employment index came in at 42.1 in July compared to 43.1 in June, suggesting hiring in the services sector is falling at a faster rate.

The bright spot in the ISM report was the new orders index, which came in at 67.7, surging by 6.1 percent compared to June’s already solid reading of 61.6. Services account for more than two-thirds of U.S. economic activity.

The reports, together with a recent rise in applications for unemployment benefits, suggest job growth pulled back sharply in July.

Still, there are glimmers of hope for America’s economy, which slipped into recession in February. In a separate report on Aug. 5, the Commerce Department said exports increased between May and June by a record 9.4 percent to $158.3 billion.

“The latest trade figures confirm that both exports and imports began rebounding in June, and we expect a continued recovery over the coming months as production catches up with the recovery in consumption,” said Michael Pearce, senior U.S. economist at Capital Economics, in remarks to The Associated Press.

America’s economy suffered its biggest blow since the Great Depression in the second quarter of this year, with gross domestic product falling at its steepest pace in at least 73 years.