U.S. Private Sector Employment Unexpectedly Drops For First Time Since April

January 7, 2021

With the impact of the coronavirus pandemic on the labor market intensifying, payroll processor ADP released a report on Wednesday showing an unexpected drop in private sector employment in the U.S. in the month of December.

ADP said private sector employment fell by 123,000 jobs in December after jumping by a downwardly revised 304,000 jobs in November.

The decrease surprised economists, who had expected employment to climb by about 88,000 jobs compared to the addition of 307,000 jobs originally reported for the previous month.

“As the impact of the pandemic on the labor market intensifies, December posted the first decline since April 2020,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “The job losses were primarily concentrated in retail and leisure and hospitality.”

The report showed the service-providing sector lost 105,000 jobs, reflecting notable decreases in employment in leisure/hospitality and trade/transportation/utilities.

Employment in the goods-producing sector also edged down by 18,000 jobs, as the manufacturing industry lost 21,000 jobs.

The unexpected drop in private sector employment also reflected a notable decrease in employment at large businesses, which cut 147,000 jobs.

Employment at small businesses also dipped by 13,000 jobs, while employment at mid-sized businesses rose by 37,000 jobs.

On Friday, the Labor Department is scheduled to release its more closely watched monthly employment report, which includes both public and private sector jobs.

Economists currently expect employment to increase by 100,000 jobs in December after climbing by 245,000 jobs in November. The unemployment rate is expected to remain at 6.7 percent.

“The correlation between ADP and nonfarm payrolls is iffy, especially in big seasonal adjustment months like December,” said Chris Low, Chief Economist at FHN Financial. “Still, the drop in ADP employment suggests at the very least any gain in employment this Friday will be small.”

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