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ADP: Hiring hits 7-month low in April, dips in March

Payroll processor ADP reported 119,000 U.S. jobs added

Payroll processor ADP reported 119,000 U.S. jobs added in April, a seven-month low, and March figures below estimates — signs of slow economic growth. “It shows the economy is growing more slowly” said economist Mark Zandi. (April 26, 2013) Credit: Getty

A private survey released Wednesday showed U.S. companies added just 119,000 jobs in April, the fewest in seven months.

The report from payroll processor ADP suggested that government spending cuts and higher taxes could be starting to weigh on the job market.

And new requirements under President Barack Obama's health care law may be prompting some small and midsize companies to hold back on hiring.

ADP also said that hiring in March was slower than first thought: the survey shows just 131,000 added, down from an initial estimate of 158,000.

"This is a bit disappointing, it shows the economy is growing more slowly as we go into the spring and summer," said Mark Zandi, chief economist at Moody's Analytics, which compiles the report from ADP's data.

The slowdown in April was broad-based. Manufacturers cut 10,000 jobs, while service-sector firms added the fewest in seven months. Construction firms added 15,000 jobs.

The ADP report is derived from payroll data and tracks private employment each month. It has diverged at times from the government's more comprehensive monthly jobs report, which will be released Friday. In March, the government said employers added 88,000 jobs, much lower than ADP's figure.

Economists forecast that the government report will show 160,000 jobs added in April. But after seeing the ADP report, many economists said the figure will likely be lower. Some are forecasting only 125,000 jobs added.

Zandi said that hiring is being affected by an increase in Social Security taxes at the beginning of the year and across-the-board spending cuts that kicked in March 1.

Along with higher taxes on wealthier Americans, which also took effect Jan. 1, the tax increases and spending cuts could subtract 1.5 percentage points from growth this year, he said.

That's the biggest government drag on the economy since the end of World War II, he said.

Health care reform may also be a reason some employers are holding back, Zandi said. Companies with 50 or more employees in 2013 have to provide insurance for their workers next year.

Firms with 20 to 49 employees have cut hiring for three straight months, from 53,000 in January to just 17,000 last month.

Zandi said he would like to see more data before drawing a firm conclusion, but it "feels like health care is having an impact."

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