After a weak March jobs report, analysts wondered whether the weak payrolls figure was merely a blip or a sign of true weakness in the job market.
Now comes a new sign that it may be time to worry. Payroll processing firm ADP announced that private firms added an estimated 119,000 jobs in April, the lowest ADP estimate since October 2012. Consensus estimates had been around 155,000, according to Bloomberg. The lower-than-expected figure may signal that Friday's jobs report from the Labor Department will be similarly discouraging.
"The ADP number was disappointing. It suggests that the job market and the economy more broadly are slowing going into the spring and summer," said Mark Zandi, chief economist at Moody's Analytics, which coproduces the report, in a call with reporters on Wednesday.
That slowdown was first signaled in March's jobs report, which counted just 88,000 new jobs for that month. March's figure could still be revised upward, but will still almost certainly come in below February's count, at 268,000 jobs. (That figure is also subject to revision.)
Zandi said that prior to this spring, underlying job growth had been at around 175,000 per month. Now, he believes that growth is slowing to around 125,000 jobs per month. That may be enough to keep up with labor force growth and keep the unemployment rate stable, he said, but it is not enough to pull the jobless rate down.
The trade, transportation, and utilities sector added 29,000 jobs last month, per ADP estimates, and professional and business services added 20,000. Construction also maintained solid growth, with an estimated 15,000 new jobs. Manufacturing, however, showed weakness, subtracting 10,000 jobs.
Despite those variations, Zandi said that government fiscal tightening affected nearly all industries and all business sizes.
"The drag is very significant. It's going to be about 1.5 percentage points of GDP," he said, adding that this is the largest fiscal pullback that the nation will have dealt with in more than 60 years.
The end of the payroll tax cut, combined with reduced government spending, has contributed heavily to that sharp slowdown. Sequestration cuts, which will mean furloughs for some government workers, could worsen the problem.
In addition, health care reform could also be eating into job growth. While there are many positive aspects of the law, Zandi said, it is causing some businesses to pull back on hiring. As the law requires businesses with 50 or more full-time employees to provide health insurance or pay a fine, some businesses with right around 50 workers are reluctant to add more.
The ADP report may presage a poor jobs report on Friday, but there is still plenty of reason to hope for a better number. While ADP's monthly estimates tend to correlate closely to government counts over time, the estimate has been known to miss – sometimes widely – in the past.