WASHINGTON -- Hiring at U.S. companies rebounded less than forecast in June, according to a private report that signals tepid payroll growth ahead of the government's monthly jobs report Friday.
U.S. companies added just 102,000 jobs last month -- after just 41,000 jobs were added in May -- payroll processor ADP said Wednesday. That fell below almost all estimates in a Bloomberg survey of economists that had called for 140,000 jobs.
In a separate report, the Institute for Supply Management said its measure of employment growth in service industries posted the steepest drop in 16 months.
The job growth of the past two months has not been substantial enough to keep pace with population growth, potentially indicating that the government's unemployment rate of 3.6% could rise, said Mark Zandi, chief economist at Moody's Analytics.
"It looks like unemployment is close to its bottom in this business cycle and will begin to move higher," Zandi said. "It is now clear that the slowdown we're experiencing is significant, and the economy is very close to what I would call a stall-out speed."
The economy just achieved the longest expansion in U.S. history, having grown for more than a decade. But a slowdown in manufacturing output and declines in construction spending have raised questions about whether the economy is losing momentum.
ADP said businesses with fewer than 20 employees cut 37,000 jobs and construction companies let go 18,000 workers. Most of the gains came in the health care, education, professional services, and trade and transportation sectors.
ADP's payroll data represent about 411,000 companies employing nearly 24 million workers in the U.S.
The figures don't include government hiring and frequently diverge from the Labor Department's official report, which is scheduled to be released Friday. The report is projected to show that nonfarm payroll growth picked up to 164,000 while the jobless rate held at a 49-year low of 3.6%. ADP had previously reported the May reading at 27,000, though even with revision the tally remains the weakest number since 2010.
A separate Labor Department report Wednesday showed filings for U.S. unemployment benefits declined for the second time in three weeks, a more encouraging sign for the job market.
Jobless claims dropped to 221,000 in the week that ended Saturday, according to Labor Department figures that were close to the median estimate in Bloomberg's survey of economists. The four-week average, a less-volatile measure, edged up.
Claims tend to be volatile around holidays, and next week's figures will include the Fourth of July holiday. Annual retooling at auto plants can also affect the data.
Federal Reserve policymakers are monitoring the jobs market for signs of strain as they consider whether to cut interest rates. A solid headline number Friday could dissuade them from lowering borrowing costs, while poor data could provide a green light.
Financial markets are pricing in a rate cut later this month over uncertainty about trade policy and slowing global growth. At the same time, robust job gains in recent years and the lowest unemployment rate in a half century have been sustaining consumer spending and boosting attitudes, extending the current economic expansion that's now the longest on record.
"Overall it's still a tight labor market, but it's becoming less tight," Jennifer Lee, senior economist at BMO, said by phone from Toronto. "It points to slower job gains at a time when you're seeing slower growth across the country in almost all areas. I'm not going to hold my breath for something strong Friday."
Information for this article was contributed by Josh Boak of The Associated Press; and by Ryan Haar, Jeff Kearns, Katia Dmitrieva and Reade Pickert of Bloomberg News.
Business on 07/04/2019