In what may be the first sign of cooling in the labor market, private employers added only 247,000 workers in April, according to a report released Wednesday from payroll firm ADP.
That was below expectations for a gain of 395,000 and compares with a revised figure of 479,000 added in March.
Notably, employment among small businesses fell by 120,000, while large businesses added 321,000 workers. Small businesses are typically less resilient to economic forces than larger companies.
“In April, the labor market recovery showed signs of slowing as the economy approaches full employment,” said Nela Richardson, chief economist at ADP. “While hiring demand remains strong, labor supply shortages caused job gains to suffer both for goods producers and services providers.”
Political Cartoons on the Economy
“As the labor market tightens, small companies, with fewer than 50 employees, struggle for competition with wages amid increased costs,” Richardson added.
The ADP report comes in a week filled with data about the labor market. On Tuesday, the government reported that a record 11.5 million jobs were available at the end of March. On Thursday, the Labor Department will report on the most recent round of claims for unemployment benefits, and then on Friday it will issue the monthly jobs report for April.
So far, the data show no letup yet in the strength of the job market, which is the tightest in history.
“This JOLTS (job openings) report raises the stakes for Friday’s jobs report, which will be the first hard evidence on whether the economy is slowing down,” Ron Hetrick, senior economist at Emsi Burning Glass, said on Tuesday. “This could be the peak of the hot job market. With GDP declining in the first quarter, it would make sense for the job market to cool off in the near future.”
The Federal Reserve is expected to raise interest rates Wednesday by 50 basis points, twice the increase it approved in March and an aggressive move to try to stem runaway inflation. The Fed has shifted its priority from stabilizing the job market following the coronavirus pandemic’s arrival in March of 2020 and is now fully committed to fighting inflation.
The central bank is also expected to begin reducing its $9 trillion in holdings of Treasurys and mortgage-backed securities. The combination of rate hikes and asset sales are intended to withdraw liquidity from the markets and slow the economy as rates rise on everything from mortgages to car loans.
Markets were slightly positive ahead of the Fed meeting, with the Dow Jones Industrial Average futures registering a gain of about 100 points. Bond yields were holding steady.