Skip to main content

America’s Economic Recovery Might Be in Trouble, Payroll Data Suggests

Has America’s economic recovery hit the skids?

Private payroll data from ADP suggests a slowdown could be underway. The July report shows activity stalling for the second straight month, though the economy is still creating jobs, albeit at a far lower rate compared to prior months.

According to ADP’s July report, the private employment sector added just 330,000 jobs from June to July, substantially below the 680,000 that were added in June and representing the lowest jobs creation total since February, when 180,000 jobs joined non-farm payrolls. But the May report showed an increase of 882,000 new jobs that were created from the 622,000 new jobs added in April, marking the year’s peak for jobs creation to this point. ADP’s payroll data  measures the change in total nonfarm private employment each month on a seasonally adjusted basis.

The Dow Jones Industrial Average dropped nearly 0.4 percent, or 126.47 points, to 34,989.93 near the start of Wednesday’s trading session after the jobs news came out. On Friday, the U.S. Department of Labor is set to report its nonfarm payroll update, which investors monitor closely. While the ADP and Labor Department reports can have differing results, the two have been more tightly aligned this year.

“The labor market recovery continues to exhibit uneven progress, but progress nonetheless. July payroll data reports a marked slowdown from the second quarter pace in jobs growth,” ADP chief economist Nela Richardson said. “For the fifth straight month the leisure and hospitality sector is the fastest growing industry, though gains have softened. The slowdown in the recovery has also impacted companies of all sizes. Bottlenecks in hiring continue to hold back stronger gains, particularly in light of new COVID-19 concerns tied to viral variants.”

Should Covid-19 barriers ebb in the coming months, correspondingly stronger monthly gains should result, Richardson added, but there’s little clarity on when a turnaround could take hold.

Related Stories

The highly contagious Delta variant—which now accounts for more than 93 percent of new U.S. coronavirus infections, the Centers for Disease Control reported Wednesday—is keeping state and local governments on their toes. On Monday, New York City became the first U.S. city to institute a “vaccine passport” requiring proof of vaccinations before people can enter certain indoor spaces. Several other states and cities have reinstated mandatory face-mask requirements.

In New York, the new mandate doesn’t yet affect retail, but could down the road.

In the meantime, don’t expect the fashion and retail sector to be at the forefront of jobs creation. That’s been left to the overall services sector where leisure and hospitality created 139,000 jobs in July, followed by education and health at 64,000 jobs and the professional and business sector at 54,000 jobs. The trade, transportation and utilities group added 36,000 jobs in July. For other services, just 16,000 jobs were created.  Franchise jobs were up by 105,400 jobs from June. But in the goods-producing sector, only 12,000 jobs were created in total, with just 8,000 jobs created in the manufacturing front.

By company size, small businesses with 1 to 49 employees added 91,000 jobs, while medium businesses between 50 to 499 employees were the biggest contributors to the July payroll report, adding 132,000 jobs. Large businesses starting at 500 employees and up added 106,000 jobs in July.