Payroll processing firm ADP reported Wednesday that hiring unexpectedly plunged at private companies in April, countering expectations of a cooling job market.
Private payrolls increased by 296,000 for the month, up from a downwardly revised 142,000 last month and well ahead of Dow Jones’ estimate of 133,000. The gain was the highest monthly increase since July 2022.
The boom has come despite the Federal Reserve’s efforts to slow economic growth and especially to tame a powerful labor market, which added more than 800,000 jobs this year by ADP’s count. The imbalance of demand versus supply in the labor market has created strong wage gains that are reflected in persistent inflationary pressures.
A positive sign for the Fed is that annual payrolls rose 6.7% from the previous year, a decline from consecutive gains above 7%.
“The slowdown in wage growth is a clear indication of what is happening in the labor market right now,” said ADP chief economist Nella Richardson. “Employers are hiring aggressively while withholding salary gains as employees come out over the edge.”
The firm’s report serves as a precursor to the Labor Department’s more closely watched non-farm payrolls count due on Friday. Economists polled by Dow Jones expect the data to show an increase of 180,000 after March’s 236,000. The two reports often differ, sometimes by a wide margin.
According to ADP, the fastest employment growth in April came in leisure and hospitality with a gain of 154,000, followed by education and health services (69,000), and construction (53,000). Other sectors posting solid growth include natural resources and mining with 52,000, and trade, transportation and utilities with 32,000.
The financial sector, battered by the deposit run, has closed three medium-sized banks, losing 28,000 jobs for the month. Manufacturing also lost 38,000 jobs as the sector contracted for the past six months.
Job gains were fairly evenly distributed by company size, with firms employing fewer than 500 workers contributing 243,000 to the total.