Private employers added just 167,000 jobs in July, indicating a coronavirus resurgence and fresh round of business closures is stalling the labor market's gradual recovery from the pandemic, according to the ADP National Employment Report released Wednesday.
It was well below the 1.5 million forecast by Refinitiv economists and marked a sharp drop from the upwardly revised 4.314 million jobs added in June.
“The labor market recovery slowed in the month of July,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “We have seen the slowdown impact businesses across all sizes and sectors.”
July hiring was concentrated in professional and business services, which added 58,000 jobs last month. A significant portion of those, 49,000, were in the administrative and support services sector.
Education and health services accounted for 46,000 jobs, while leisure and hospitality -- one of the areas hit hardest by the shutdowns earlier this year -- added 38,000.
Large businesses led industries by size with the addition of 166,000 jobs last month. Small businesses added 63,000 jobs, while medium businesses shed 25,000 employees. Financial activities pared down 18,000 jobs, and information lost 3,000. Another 8,000 were shed in the construction industry. Manufacturing added 10,000 jobs.
The sharp slowdown in job creation comes as the U.S. grapples with a flare-up in COVID-19 infections across the country. Some states have hit pause on their reopening plans, while others have reimposed restrictions they had previously lifted.
If the outbreak of the virus continues to intensify, forcing more businesses to shut down again, economists have warned the consequences could be dire. The number of Americans filing for unemployment benefits has risen for the past two consecutive weeks.
The data is typically a good indicator of what to expect in the more closely watched jobs report from the Labor Department, which is predicted to show the U.S. economy added 1.6 million jobs last month, down from June's gain of 4.8 million, a record high. Analysts anticipate unemployment will edge lower to 10.5 percent from 11.1 percent.
The report will be released Friday at 8:30 a.m. ET.