Companies added fewer workers than projected in January as colder-than-normal temperatures limited progress in the U.S. job market, a private report based on payrolls showed Wednesday.
The 175,000 job increase was the smallest in five months and comes after a revised 227,000 rise in December that was weaker than initially reported, according to the ADP Research Institute in Roseland, N.J. The median projection of 40 economists surveyed by Bloomberg called for an advance of 185,000.
Businesses took on fewer workers as inclement weather gripped much of the nation and kept some shoppers from venturing out to stores and auto dealerships. A pickup in hiring would help spur the wage gains needed to propel the consumer spending that accounts for almost 70 percent of the economy.
“There’s a lot of uncertainty on the weather effect but the broader message from ADP is that the trend in private payrolls remains pretty solid,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, N.Y. “Consumer spending can sustain a reasonably healthy pace.”
Estimates in the Bloomberg survey ranged from gains of 125,000 to 241,000. The previous month’s figure was revised from an earlier reported increase of 238,000.
Another report showed service industries expanded at a faster pace in January. The Institute for Supply Management’s nonmanufacturing index increased to 54 last month from 53 in December. The Tempe, Ariz.-based group’s employment gauge climbed to the highest level since November 2010.
The survey covers businesses that employ 90 percent of the U.S. workforce, including retail, construction, health-care and financial services firms. Because these companies are less sensitive to nasty weather than manufacturers are, the January figure suggests that a reported slowdown at factories last month was in part because of the winter chill rather than broader weakness in the economy.
The services sector has experienced “slow, incremental growth” for the past four years and is on a sustainable path, said Anthony Nieves, chairman of the institute’s services survey. “It’s been chugging along very steady,” Nieves said, adding that the 4½-year-old recovery from the recession has been “very resilient even with the ups and downs.”
Manufacturers, builders and other goods-producing industries increased their headcount by 16,000. Employment in construction rose by 25,000, while factories lost 12,000 jobs, Wednesday’s report showed. The decline in manufacturing employment was the first since July.
Payrolls at service providers advanced by 160,000. Professional and business services contributed the most to growth among all service industries.
Companies employing 500 or more workers added 34,000 jobs. Medium-sized businesses, with 50 to 499 employees, took on 66,000 workers and small companies increased payrolls by 75,000.
“Cold and stormy winter weather continued to weigh on the job numbers,” Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pa., said in a statement.
Moody’s produces the figures with ADP. “Underlying job growth, abstracting from the weather, remains sturdy.”
Some businesses are taking steps to reduce labor expenses. Leucadia National Corp., the investment firm run by Richard Handler, plans to shut a beef-processing facility with 1,300 workers in Brawley, Calif., according to a regulatory filing. The company said production is set to stop on April 4 and it would work to find jobs for staff members at other facilities.
Weyerhaeuser Co., a real estate investment trust and owner of U.S. timberlands, is among companies counting on more business as the labor market improves.
“The economy has been adding jobs, and as people find employment, they’re forming households and adding to the demand for housing,” Doyle Simons, chief executive officer, said on a Friday earnings conference call. “These trends are expected to continue in 2014, and we’re planning for” growth in home building.
The Labor Department’s Friday report is expected to say that businesses added 188,000 employees in January after an 87,000 increase in December, according to the median forecast of economists surveyed by Bloomberg.
The figures may also show overall payrolls, which include government agencies, rose by 184,000 workers last month after climbing by 74,000 in December, according to the survey. The unemployment rate probably held at 6.7 percent, the lowest since October 2008.
Last month was the coldest January since 1994 in the contiguous U.S. in terms of gas-weighted heating degree days, a measure of energy demand, according to the Commodity Weather Group LLC in Bethesda, Md. Such conditions hurt demand for motor vehicles, one of the bright spots in consumer spending in this expansion.
General Motors Co. and Ford Motor Co., the largest U.S. automakers, reported bigger declines in January deliveries than analysts estimated as the weather conditions kept some shoppers from dealerships.
Information for this article was contributed by Shobhana Chandra, Kristy Scheuble, Vince Golle and Carlos Torres of Bloomberg News and Josh Boak of The Associated Press.
Business, Pages 25 on 02/06/2014