Feb. 5 (Bloomberg) -- Companies added fewer workers than projected in January as colder-than-normal weather limited progress in the U.S. job market, a private report based on payrolls showed today.
The 175,000 increase was the smallest in five months and followed a revised 227,000 rise in December that was weaker than initially reported, according to the ADP Research Institute in Roseland, New Jersey. The median projection of 40 economists surveyed by Bloomberg called for an advance of 185,000.
Businesses took on fewer workers as inclement weather gripped much of the nation and kept some shoppers from venturing out to stores and auto dealerships. A pickup in hiring would help spur the wage gains needed to propel the consumer spending that accounts for almost 70 percent of the economy.
“There’s a lot of uncertainty on the weather effect but the broader message from ADP is that the trend in private payrolls remains pretty solid,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, New York, who correctly projected the gain. “Consumer spending can sustain a reasonably healthy pace.”
Estimates in the Bloomberg survey ranged from gains of 125,000 to 241,000. The prior month’s figure was revised from a previously reported increase of 238,000.
Another report showed service industries expanded at a faster pace in January. The Institute for Supply Management’s non-manufacturing index increased to 54 last month from 53 in December. The Tempe, Arizona-based group’s employment gauge climbed to the highest level since November 2010.
Stocks fell for the third time in four days after the ADP figures. The Standard & Poor’s 500 Index dropped 0.9 percent to 1,740.06 at 10:30 a.m. in New York.
Manufacturers, builders and other goods-producing industries increased headcount by 16,000. Employment in construction rose by 25,000, while factories lost 12,000 jobs, today’s report showed. The decline in manufacturing employment was the first since July.
Payrolls at service providers advanced by 160,000. Professional and business services contributed the most to growth among all service industries.
Companies employing 500 or more workers added 34,000 jobs. Medium-sized businesses, with 50 to 499 employees, took on 66,000 workers and small companies increased payrolls by 75,000.
“Cold and stormy winter weather continued to weigh on the job numbers,” Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said in a statement. Moody’s produces the figures with ADP. “Underlying job growth, abstracting from the weather, remains sturdy.”
Some businesses are taking steps to reduce labor expenses. Leucadia National Corp., the investment firm run by Richard Handler, plans to shut a beef-processing facility with 1,300 workers in Brawley, California, according to a regulatory filing. The company said production is set to stop on April 4 and it would work to find jobs for staff at other facilities.
Weyerhaeuser Co., a real estate investment trust and owner of U.S. timberlands, is among companies counting on more business as the labor market improves.
“The economy has been adding jobs, and as people find employment, they’re forming households and adding to the demand for housing,” Doyle Simons, chief executive officer, said on a Jan. 31 earnings conference call. “These trends are expected to continue in 2014, and we’re planning for” the boost to homebuilding.
The Labor Department may report in two days that businesses added 188,000 employees in January after an 87,000 increase in December, according to the median forecast of economists surveyed by Bloomberg.
The figures may also show overall payrolls, which include government agencies, rose by 184,000 workers last month after climbing by 74,000 the prior month, according to the survey. The unemployment rate probably held at 6.7 percent, the lowest since October 2008.
Last month was the coldest January since 1994 in the contiguous U.S., in terms of gas-weighted heating degree days, a measure of energy demand, according to the Commodity Weather Group LLC in Bethesda, Maryland. Such conditions hurt demand for motor vehicles, one of the bright spots in consumer spending in this expansion.
General Motors Co. and Ford Motor Co., the largest U.S. automakers, reported bigger declines in January deliveries than analysts estimated as the weather conditions kept some shoppers from dealerships.
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