Companies took on fewer workers than projected in August, a sign that recent momentum in the U.S. labor market may be easing, a private report based on payrolls showed.
The 204,000 increase in employment followed a 212,000 gain the prior month that was smaller than initially estimated, according to figures today from the Roseland, New Jersey-based ADP Research Institute. The median forecast of 43 economists surveyed by Bloomberg called for an August advance of 220,000.
Employers are probably confident that, after accelerating hiring for most of this year, they can meet demand without adding as many workers. While employment opportunities have picked up, they haven’t been accompanied by the stronger wage growth that would help spark bigger gains in consumer spending and economic growth.
“The underlying trend here is still pretty strong,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, and the best forecaster of ADP payrolls over the last two years, according to data compiled by Bloomberg. “The labor market is improving but we still have a lot of slack.”
Estimates in the Bloomberg survey ranged from payroll gains of 190,000 to 290,000 after a previously reported July gain of 218,000.
Stock-index futures rose, with the Standard & Poor’s 500 Index near an all-time high, after the European Central Bank unexpectedly cut interest rates and announced a bond-buying program to stimulate the economy. The contract on the S&P 500 expiring this month climbed 0.3 percent to 2,004.8 at 8:48 a.m. in New York.
Goods-producing industries, which include manufacturers and construction companies, increased headcount by 41,000 in August, according to today’s report. Construction employment climbed by 15,000 and factory payrolls rose by 23,000. Payrolls at service providers increased by 164,000.
Companies employing 500 or more workers added 52,000 jobs. Employment at businesses with 50 to 499 employees increased 75,000 and the smallest companies boosted payrolls by 78,000, the report showed.
“Steady as she goes in the job market,” Mark Zandi, chief economist at Moody’s Analytics Inc., said in a statement. Moody’s produces the figures with ADP. “Job gains are broad-based across industries and company sizes.”
The ADP report is based on data from businesses with more than 21 million workers on their combined payrolls.
The Labor Department data may show tomorrow that payrolls added 230,000 workers last month after 209,000 in the month prior, according to the median estimate in a Bloomberg survey. The jobless rate probably fell to 6.1 percent from 6.2 percent, the survey showed.
Federal Reserve policy makers are watching progress in the labor market as they wind down their bond-buying program aimed at boosting economic growth. Policy makers in July tapered monthly bond buying to $25 billion in their sixth consecutive $10-billion cut, staying on pace to end the purchase program in October.
The labor market still has room for improvement, Fed Chair Janet Yellen said in a speech earlier last month at the Kansas City Fed’s annual conference in Jackson Hole, Wyoming. While the five-year expansion has put more Americans back to work, “a key challenge is to assess just how far the economy now stands from attainment of its maximum employment goal,” she said.
Kirkland’s Inc., which sells home accessories and gifts, is among companies that would also like to see further improvement in the labor market. The retailer trimmed its sales guidance for fiscal 2014 for an increase of up to 8.5 percent from the year before, down from the gain of 10 percent it expected in May.
“We would still prefer a better jobs environment and housing market to feel more comfortable with the state of the consumer,” Chief Executive Officer Robert Alderson said on an Aug. 21 conference call. “Sustained economic optimism and predictable growth are required to produce both.”