WASHINGTON – U.S. companies added jobs at the slowest pace in three years in April, a private survey found, a sign that slower growth and volatile financial markets could be weighing on hiring.
Payroll processor ADP said Wednesday that businesses added 156,000 jobs in April, down from 194,000 in March. Manufacturers shed 11,000 jobs, after losing 3,000 the previous month. Services firms added 166,000, down from 189,000.
The figures suggest that businesses tapped the brakes on hiring last month after the economy barely expanded in the first quarter. It grew just 0.5 per cent at an annual rate, the weakest showing in two years. Stock prices, meanwhile, fell 15 per cent at the beginning of the year. That could have also unnerved some business owners and managers and delayed hiring decisions.
Those trends “may have had some impact on senior managers at some companies and their thinking about hiring and investment,” Mark Zandi, chief economist at Moody’s Analytics, said. Moody’s compiles the ADP data.
The figures come just two days before the U.S. government’s official jobs report. The ADP numbers cover only private businesses and often diverge from the official figures.
Daniel Silver, an economist at JPMorgan Chase, calculates that the ADP figures have deviated from the government’s by an average of 42,000 a month in the past several years.
Economists forecast that employers added 200,000 jobs in April, while the unemployment rate remained 5 per cent.
Some economists cautioned against reading too much into one month’s data. Zandi argued that other recent job market figures, such as the number of people seeking unemployment benefits each week, still point to steady hiring.
There are also some faint signs that growth could pick up from the weak first quarter. Auto sales rose in April after falling off the previous month. And sales of existing homes increased in March, after a drop in February. They have been mostly flat so far this year.
Yet separate figures from the Labor Department Wednesday suggest that job gains could slow later this year.
A measure of American workers’ productivity fell 1 per cent at an annual rate in the first three months of this year, the government said.
That followed an even sharper decline of 1.7 per cent in the final three months of last year.
Productivity, or the amount of output per hour worked, falters when job gains outpace economic growth. That’s what has happened in the past six months: employers added an average of 246,000 jobs from October through March.
Yet growth was just 1.4 per cent at an annual rate in last year’s fourth quarter, before slipping to 0.5 per cent in the first quarter.
Weak productivity gains will restrain the economy and hiring in the coming months, Zandi said, unless businesses can find ways to boost the efficiency of their workers.
Hiring has been solid for the past several years as businesses have soaked up the large numbers of unemployed left after the Great Recession.
Once unemployment reaches levels consistent with a healthy economy, hiring and economic growth will reflect changes in productivity and the growth of the U.S. working-age population. Both have been sluggish since the recession.
Slow gains in efficiency also cut into corporate profits and can make it harder for employees to push for higher pay.
“Nothing really works unless productivity growth picks up, particularly after we hit full employment and enter a tight labour market,” Zandi said.