US private sector adds fewer jobs than expected in July

Private sector employment in the US grew less than expected in July amid a shortage of workers, according to the latest figures from the ADP.

Employment rose by 330,000 from June, versus expectations for a 695,000 increase. Meanwhile, the June total of jobs added was revised to 680,000 from 692,000.

Nela Richardson, chief economist at ADP, said: "The labour market recovery continues to exhibit uneven progress, but progress nonetheless. July payroll data reports a marked slowdown from the second quarter pace in jobs growth.

"For the fifth straight month the leisure and hospitality sector is the fastest growing industry, though gains have softened. The slowdown in the recovery has also impacted companies of all sizes. Bottlenecks in hiring continue to hold back stronger gains, particularly in light of new Covid-19 concerns tied to viral variants. These barriers should ebb in coming months, with stronger monthly gains ahead as a result."

Small business with fewer than 50 employees added 90,000 jobs, while medium businesses with between 50 and 499 employees added 132,000. Large businesses with more than 500 employees created a further 106,000 jobs.

The services sector added 318,000 jobs, while the goods-producing sector created 12,000 jobs.

Capital Economics said the disappointing gain in the ADP measure of private payroll employment in July suggests that labour shortages are still acute.

"The ADP is not always a good predictor of the official non-farm payroll employment figures but, for what it’s worth, it suggests a clear downside risk to not only the consensus forecast at 880,000, but our own below-consensus 650,000 estimate.

"According to Fed official Christopher Waller yesterday, another couple of strong payroll reports to match the 850,000 gain in June would be enough for the hawks like him to greenlight a QE taper starting in the fourth quarter of this year. But if the ADP is to be believed and employment growth has slowed again, then that would support the doves who appear to want to wait until early next year to begin the taper. The July report, due this Friday, is especially important because it is the last employment data the Fed will have ahead of the Jackson Hole Symposium toward the end of this month."