EDITOR'S NOTE: A strange concept that may be difficult for a lot of people to wrap their heads around: unemployment is at record lows yet there’s a labor shortage in which companies can’t find enough workers to fill their open positions. This continues to remain the case as the latest ADP report shows that private payrolls in April increased at a rate that sorely missed analyst expectations. The answer to this seeming riddle is that the “participation rate” is not where it should be. Workers have quit their jobs at a record pace while other potential workers are likely biding their time, seeking better opportunities, higher wages, and more competitive working conditions. While this may be a boon for workers, it can also be damaging to the economy. Not only does it disrupt the flow of production on the business end, a tight labor market also tends to drive up wage growth which, in turn, accelerates inflation; possibly causing the two to spiral. Today’s labor report topped economist expectations. Job growth was relatively strong, but the participation rate remained weak, hovering below pre-pandemic levels. Economists believe that recovery in participation may help stem wage inflation. But it turns out that’s not the case. The market's response at the time of writing was unsurprisingly negative, following yesterday’s plunge.
- Private payrolls increased by just 247,000 for April, payrolls processing firm ADP reported.
- That was well below the estimate for 390,000 and a significant decline from March, which saw an upwardly revised gain of 479,000.
- The report serves as a precursor to Friday's nonfarm payrolls count, though the two can differ by wide margins.
Companies added far fewer jobs than expected in April as the struggle to find workers to fill open positions continued, payrolls processing firm ADP reported Wednesday.
Private payrolls increased by just 247,000 for the month, well below the 390,000 Dow Jones estimate. That was a big decline from March, which saw an upwardly revised gain of 479,000.
A drop-off in small business hiring was the primary culprit for the disappointment, as companies with fewer than 50 workers saw a decline of 120,000. The issue was particularly acute in those with fewer than 20 employees, which lost 96,000 workers on the month.
"In April, the labor market recovery showed signs of slowing as the economy approaches full employment," said ADP's chief economist, Nela Richardson. "While hiring demand remains strong, labor supply shortages caused job gains to soften for both goods producers and services providers."
Big businesses with 500 or more workers compensated for some of the decline, adding 321,000.
Leisure and hospitality businesses led job creation with 77,000 additions. Professional and business services grew by 50,000 and education and health services contributed 48,000 to the total.
Information services was the only sector to report a decline, losing 2,000 workers.
In all, services-related industries comprised 202,000 of the total while goods producers added 46,000, led by manufacturing's 25,000, while construction grew by 16,000. (The totals are rounded.)
The ADP report serves as a precursor to Friday's more closely watched nonfarm payrolls count from the Bureau of Labor Statistics.
That report is expected to show growth of 400,000 and a decline in the unemployment rate to 3.5%. If that forecast for the jobless rate is correct, it will match the pre-pandemic level, which was the lowest since December 1969. Payrolls increased by 431,000 in March
March ended with a gap of 5.6 million between open positions and available workers. That has caused wages to spike, though they have still failed to keep up with inflation running at its fastest pace in more than 40 years.
Correction: Payrolls increased by 431,000 in March. An earlier version misstated the month.
Originally published on CNBC.