U.S. private sector payroll growth fell well short of expectations in July, according to data released Wednesday, raising doubts about the strength of the upcoming federal jobs report.
The ADP National Employment report for July showed a gain of just 330,000 jobs for nonfarm businesses in the private sector, down from 680,000 in June and roughly half of the 650,000 jobs economists expected firms to add last month.
“July payroll data reports a marked slowdown from the second quarter pace in jobs growth,” ADP chief economist Nela Richardson said in the report.
“Bottlenecks in hiring continue to hold back stronger gains, particularly in light of new COVID-19 concerns tied to viral variants,” she continued. “These barriers should ebb in coming months, with stronger monthly gains ahead as a result."
The ADP report is released two days before the federal jobs report, which covers both the private and public sectors. While the ADP report has differed greatly with the federal report throughout the pandemic, the sharp drop in private sector payroll growth comes amid growing concerns about the economic impact of the delta variant of COVID-19.
The delta variant has caused COVID-19 cases to spike rapidly among unvaccinated people, though studies have shown that those vaccinated against COVID-19 are highly unlikely to experience serious symptoms. The resurgence in coronavirus cases has prompted several cities to reimpose mask mandates and is expected to dampen consumer activity in some particularly hard-hit areas.
Data from payroll processor Homebase also showed a 0.4 percent decline in the number of hours worked by small businesses in July. Homebase also found that states that ended federal unemployment benefits early saw employment decline 0.9 percent in July, while states that kept the benefits saw employment increase by 2.3 percent.