Is Hiring Slowing? Economists Watchful, But Unworried

Worried investors sent stocks lower today after ADP said private employers added 167,000 jobs in April, the smallest increase in 16 months and well below the 200,000 economists were forecasting.

Compounding the surprise, the HR services and payroll processing company revised down its initial jobs report for March, lowering the already disappointing 189,000 to 175,000.

The significance of the ADP report is often questioned by economists since the numbers rarely track with the government’s monthly employment report, which it precedes by a day or two. Surveys of economists’s forecasts show they expect the government report this Friday to put April’s job growth somewhere around 225,000.

“The ADP is no fortune teller,” said BNP Paribas economist Bricklin Dwyer, in a note to clients quoted by the Associated Press.

Still, the ADP report is considered a bellcow for the Labor Department’s report, correctly predicting, if not the exact numbers, the general direction of the report.

Besides the ADP jobs numbers, other economic reports added to the fuzziness over the state of the U.S. economic expansion.

The Institute for Supply Management last week said manufacturing continues to expand, but slowly. It’s monthly index for April was unchanged from March, while it’s measure of manufacturing job growth dropped. However the ISM’s non-manufacturing index was up, as was the index of non-manufacturing job growth.

The Conference Board’s Consumer Confidence Index nosedived in April, dropping 6 points from March. It had reached a post-recession high of 103.8 in January. The number of new online job ads also declined last month. The Conference Board said there were 104,500 fewer new postings in April than in March.

Another report, this one from the Labor Department’s Bureau of Labor Statistics, said worker productivity fell in the first quarter by annualized rate of 1.9 percent. Bloomberg News said it was the largest drop in more than two decades.

However, Bloomberg said economists are more optimistic than the reports might imply, blaming temporary factors including harsh weather, the West coast port strike, a stronger dollar and a drop in oil costs for the slowdown.

ADP’s report suggested much the same.

“Fallout from the collapse of oil prices and the surging value of the dollar are weighing on job creation,” said Mark Zandi, chief economist of Moody’s Analytics. Moody’s prepares the monthly National Employment Report for ADP. “Employment in the energy sector and manufacturing is declining. However, this should prove temporary and job growth will reaccelerate this summer.”

The ADP report said nearly all April’s hiring came from smaller employers. Those with fewer than 50 employees increased headcount by 94,000 workers; those between 50 and 499 added 70 new jobs. The largest companies, those with more than 1,000 employees, added a mere 5,000.

The only sector to shed jobs was manufacturing, which ADP said, cut 10,000.