US private sector employment grows more than expected in April - ADP

Private sector employment in the US grew more than expected in April, according to data released by the ADP on Wednesday.

Employers added 275,000 jobs last month versus expectations for an 180,000 increase. Meanwhile, March's total of jobs added was revised up from 129,000 to 151,000.

Small businesses with fewer than 50 employees added 77,000 jobs, while medium-sized business with between 50 and 499 employees created an additional 145,000 jobs. Large businesses with 500 or more employees recruited an extra 53,000 people.

The goods-producing sector added 52,000 jobs, while the services sector recruited 223,000 people, with professional/business services making the biggest contribution, at 59,000.

Mark Zandi, chief economist at Moody’s Analytics, said: "The job market is holding firm, as businesses work hard to fill open positions. The economic soft patch at the start of the year has not materially impacted hiring. April’s job gains overstate the economy’s strength, but they make the case that expansion continues on."

Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, said: "April posted an uptick in growth after the first quarter appeared to signal a moderation following a strong 2018. The bulk of the overall growth is with service providers, adding the strongest gain in more than two years."

Capital Economics economist Michael Peace said surge in private payroll employment will fuel expectations that the official figures, due out on Friday, will show a similarly impressive gain.

"Unfortunately, the more reliable survey evidence and the temporary employment figures of the official series itself suggest our below-consensus forecast for a subdued 165,000 gain will be closer to the mark.

"Overall, the figures suggest some upside risk to our forecast that the official figures will show payroll employment growth slowing to 165,000 in April, following a 196,000 gain in March. But the ADP figures have not been a great guide to the official figures and are frequently revised, so we prefer to rely on a much wider range of indicators, the vast majority of which point to slower employment growth ahead. That is one reason why we expect the Fed to sound extremely dovish again at the conclusion of its two-day policy meeting later today."

Pantheon Macroeconomics said: "This is a big surprise, and very hard to square with survey evidence; all the private sector indicators we follow suggest labour demand is running at about 175-to-200K per month. But the ADP report this month appears to be free of obvious distortions - though temperatures were a bit milder than usual - so we can’t just ignore it.

"The survey is not a reliable indicator of the official payroll numbers every month but the error against our ADP forecast is big enough to move the needle on our estimate for Friday’s official report; we now expect the BLS to report a 240K increase in April payrolls. That pace is not sustainable but it is a reminder, along with the very strong GDP numbers, that the economy has suffered no lasting ill-effects from the plunge in stock prices in Q4 last year."