The ADP National Employment Report was released today and it shows that 169,000 private sector jobs were added in April. In addition, the March total of jobs added was revised down from 189,000 to 175,000. This is the second month in a row that the number of new jobs fell below 200,000 according to ADP. This does not reflect any public sector employment. The ADP Report is not the “official” jobs report. It will be released by the Bureau of Labor Statistics Friday.
ADP collects its data from surveying its member companies and extrapolating the data. The matched sample used to develop the ADP Report was derived from ADP payroll data, which represents 411,000 U.S. clients employing nearly 24 million workers in the U.S. By comparison, ADP reported 242,000 jobs in April of last year, followed by 208,000 in May and 297,000 in June of 2014.
As is generally the case, most of the jobs were added in the service sector, which saw an increase of 170,000 jobs. The goods producing sector lost 1,000 jobs, mostly due to a reduction of 10,000 manufacturing jobs. Construction remained strong adding 23,000 new positions last month.
Most of the new jobs were added by small businesses, which are the backbone of the economy. A total of 94,000 jobs were added by firms with fewer than 49 employees. Middle-sized companies added 70,000 jobs. Large companies actually laid off 2,000 workers in April.
Much of the slowdown is attributable to two factors: the severe winter weather and the drop in oil prices. While good for the consumer, low oil prices have had a chilling effect on the booming oil and gas industry in the United States. As a result, many rigs have been shut down. New production has slowed to a trickle.
This slowdown in oil and gas hits various sectors of the economy. First of all, many production workers have been laid off. Not only does that affect them, but it hurts local businesses in oil patch towns that rely on spending by local workers. It also affects truckers and others involved in transporting supplies to the oil fields, and product to market. Lastly, it decreases demand for parts and other supplies needed for production. Thus there was a drop in manufacturing jobs.
Mark Zandi, chief economist of Moody’s Analytics which co-authors the report, said, “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.”
Oil prices reached $60 a barrel Tuesday for the first time this year. They are expected to rise slowly due to decreased supply.
There had been speculation that consumers would spend the windfall from low prices at the pump. Although consumer spending is responsible for the increase in service sector jobs, Americans have used the money to pay off debt, buy homes, or beef up their savings. This is good for the economy overall, but it did not give the boost to short-term job growth many expected.
It will be interesting to see what the BLS report shows Friday. Sometimes ADP is a leading indicator.
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