US private sector employment expanded at a much slower rate than forecast in April, a sign employers were hesitant about adding new workers following a sharp downturn in economic activity in the first quarter.
Private employers added 169,000 payrolls in April, following a revised gain of 175,000 that was originally reported as 189,000, payrolls processor ADP reported on Wednesday. Economists forecast a monthly increase of 200,000.
The services sector was responsible for all of the gains last month, adding 170,000 jobs. The gains were led bY trade, transportation and utilities, which added 44,000 payrolls. The professional and business services sector also added 34,000 jobs in April.
Goods producers shed 1,000 jobs last month. Manufacturing lost 10,000 jobs, while construction added 23,000.
“April job gains came in under 200,000 for the second straight month,” said ADP president and CEP Carlos Rodriguez in a statement. “Companies with 500 or more employees had the slowest growth.”
Added Mark Zandi of Moody’s Analytics, “Fallout from the collapse of oil prices and the surging value of the dollar are weighing on job creation. Employment in the energy sector and manufacturing is declining. However, this should prove temporary and job growth will reaccelerate this summer.”
ADP data are released just two days before the Labor Department’s official nonfarm payrolls report. On Friday the government is expected to show the creation of 213,000 nonfarm payrolls in April after job growth slowed to just 126,000 in March. That was far less than analysts had predicted and the weakest rate of hiring since December 2013.
The unemployment rate is forecast to drop to 5.4 percent in April from 5.5 percent, offering more evidence of a tighter labour market. Last week the Labor Department said initial jobless claims decreased by 34,000 to 262,000 in the week ending April 25, the lowest since April 2000.
The labour market is expected to progress toward full employment in the next three years, according to the Federal Reserve. The Fed forecasts the unemployment rate to drop to as low as 5 percent this year before falling to 4.8 percent by 2017, according to the March summary of economic projections.