US sees deep private hiring slump ahead of jobs data

WASHINGTON: US private sector hiring slumped in July, the latest sign of the shaky footing of the world's largest economy as it struggles with a protracted coronavirus outbreak.
Payroll services firm ADP reported on Wednesday the United States added just 167,000 private sector jobs in July -- nowhere near analyst' expectations of a 1.6 million rise in a month when many states rolled back reopening measures as they faced a surge in new COVID-19 infections.
"The labor market recovery slowed in the month of July," said Ahu Yildirmaz, vice president of the ADP Research Institute.
"We have seen the slowdown impact businesses across all sizes and sectors."
The report, along with data in a separate survey from the Institute for Supply Management (ISM), was a bleak omen ahead of two new Labor Department data releases in the coming days, including the July unemployment rate on Friday and weekly new jobless claims data on Thursday, the latter of which has started rising again in recent weeks after falling for months.
In an appearance on CNBC, Federal Reserve Vice Chair Richard Clarida acknowledged "some of the growth momentum has slowed" after key sectors bounced back in May and June following the shut down of much of the US economy to stop the coronavirus from spreading.
"We'll get a bounceback in the third quarter... but it will take some time before we get back to the level of economic activity of February before the virus struck," Clarida said, predicting recovery may stretch through the end of next year.
The ADP numbers come as Congress continues negotiating on a new aid package to bolster the economy after tens of millions of people lost their jobs after the lockdowns began in mid-March.
ADP reported mid-sized firms saw employment decline by 25,000, while large companies with 500 or more employees added the most jobs with 129,000, and small businesses with less than 50 added 63,000.
Among sectors, goods-producing employers saw nearly flat hiring with 1,000 jobs added. The services industry added 166,000 jobs, with professional and business employers as well as education and health gaining the most.
The ISM services index released Wednesday saw its second consecutive month of growth in July, ticking up above expectations to 58.1 percent and bolstering the case that the hard-hit sector is improving.
Any rating above 50 percent equals growth, and business activity improved slightly to 67.2 percent while new orders jumped 6.1 points to 67.7 percent.
The supplier deliveries index, which is inverse, declined slightly to 55.2 percent indicating "deliveries are now more closely correlating to the current supply and demand," the survey's chair Anthony Nieves said.
"Respondents remain concerned about the pandemic; however, they are mostly optimistic about business conditions and the economy as businesses continue to reopen," he said.
But the growth wasn't enough to support employment, which declined one point to 42.1 percent.
The ISM data showed momentum picking up in the services sector but Rubeela Farooqi of High Frequency Economics warned that the ADP data bodes ill for the country at large.
But whether that weakness will be reflected in the Labor Department data to be released Friday remains to be seen; the two surveys' methodologies are different enough that their results may not correlate, she said.
"A substantial slowdown in private and total payrolls in July will be unwelcome news, indicative of renewed pressure on the labor market from outbreaks and repeated interruptions of activity," she said in an analysis.
"Risks remain to the downside as long as the virus remains uncontained."
The Commerce Department separately reported on Wednesday that the US trade deficit dropped slightly in June to $50.7 billion on a record increase in exports.
The $4.1 billion decline in the trade gap from May came from a 9.4 percent jump in exports of goods and services, the largest on record, while imports rose just 4.7 percent.