Private payrolls rose by 247,000 in April, missing expectations


U.S. private employers hired the fewest workers in two years in April, likely hampered by persistent labor shortages, raising the possibility that overall job growth slowed last month.

The ADP National Employment Report on Wednesday showed a broad slowdown in hiring, with job gains in the leisure and hospitality industry also the smallest since late 2020. Companies with less than 50 employees saw a decline in payrolls.

"While hiring demand remains strong, labor supply shortages caused job gains to soften," said Nela Richardson, ADP chief economist. "As the labor market tightens, small companies with fewer than 50 employees, struggle with competition for wages amid increased costs."

Private payrolls rose by 247,000 jobs last month, the smallest gain since April 2020. Data for March was revised higher to show 479,000 jobs added instead of the 455,000 initially reported. Economists polled by Reuters had forecast private payrolls would increase by 395,000 jobs.

The ADP report is jointly developed with Moody's Analytics and was published ahead of the release on Friday of the Labor Department's more comprehensive and closely watched employment report for April. It has, however, a poor record predicting the private payrolls count in the department's Bureau of Labor Statistics employment report because of methodology differences.

"Job growth will slow over the course of 2022, not because of a lack of demand for labor, but a lack of supply," said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. "The tight labor market is pushing up wages, adding to inflationary pressures in the U.S. economy."

The Federal Reserve is expected to hike interest rates by half of a percentage point later on Wednesday, and likely to start trimming its asset holdings soon. The U.S. central bank raised its policy interest rate by 25 basis points in March.

Government data on Tuesday showed there were a record 11.5 million job openings on the last day of March, which pushed up the jobs-workers gap to a record 3.4% of the labor force from 3.1% in February. 

According to a Reuters survey of economists, private payrolls likely increased by 385,000 jobs in April after rising by 426,000 in March. With further gains in government employment expected, that would likely lead to an increase of 394,000 in nonfarm payrolls. The economy created 431,000 jobs in March.

A separate report from the Commerce Department on Wednesday showed the trade deficit surged to a record high in March, confirming that trade weighed on the economy in the first quarter and could remain a drag as businesses replenish inventories with imported goods.

The trade deficit accelerated 22.3% to $109.8 billion in March amid a record increase in imports. Economists had forecast a $107 billion deficit.

The government reported last week that a record trade deficit sliced 3.20 percentage points from gross domestic product in the first quarter, resulting in GDP contracting at a 1.4% annualized rate after growing at a robust 6.9% pace in the fourth quarter.

Trade has subtracted from GDP for seven straight quarters. Imports of goods and services jumped 10.3% to $351.5 billion, outpacing a 5.6% rise in exports to $241.7 billion.

Imports of goods were boosted by industrial supplies and materials, which increased $11.3 billion to $76.4 billion, the highest since July 2008. Petroleum imports in March were the highest since December 2014. Consumer goods imports rose $10.0 billion to a record $83.1 billion, lifted by apparel, household goods, footwear, toys, games and sporting goods.

Capital goods increased $5.2 billion, while imports of motor vehicles and parts rose $3.2 billion. Imports of services increased $0.9 billion to $52.7 billion, reflecting rises in transport and travel, but charges for the use of intellectual property decreased $1.2 billion.

"What the huge demand for imported goods does show is that America may have more of a demand problem than a supply problem," said Christopher Rupkey, chief economist at FWDBONDS in New York. "As long as import demand keeps setting records, it shows the Fed has to keep pushing interest rates up and up because American consumers and businesses are not done buying yet and strong demand keeps the inflation fires burning."

Exports of goods were supported by a $7.4 billion increase in industrial supplies and materials, which reflected rises in shipments of crude oil and natural gas liquids. Motor vehicle and parts exports increased $1.0 billion.

Exports of services increased $1.2 billion to $71.1 billion in March. They were lifted by gains in transport, travel, financial services and other business services.

U.S. services industry growth unexpectedly slowed in April, with employment contracting for the second time this year, while a measure of input prices raced to a record high.

The Institute for Supply Management said on Wednesday its non-manufacturing activity index fell to a reading of 57.1 last month from 58.3 in March. Economists polled by Reuters had forecast the non-manufacturing index little changed at 58.5.

A reading above 50 indicates expansion in the services sector, which accounts for more than two-thirds of U.S. economic activity. The surprise slowdown could reflect persistent supply constraints, which have been worsened by new COVID-19 lockdowns in China and Russia's war against Ukraine.

Coming on the heels of an ISM survey on Monday showing manufacturing growing at its slowest pace in more than 1-1/2 years in April, the slowdown in the services industry could be a potential red flag for the economy.

The economy contracted at a 1.4% annualized rate in the first quarter, though that was largely because of a record trade deficit. Domestic demand remained solid, with consumer spending rising and business investment on equipment accelerating.

The ISM's measure of new orders received by services businesses fell to 54.6 from a reading of 60.1 in March. The moderation came despite spending shifting back to services from goods. Order backlogs also increased at a slower pace relative to March and exports cooled.

Its services industry employment gauge fell to 49.5, the second contraction this year, after rebounding to 54.0 in March. The decline likely reflects perennial worker shortages. The Labor Department reported on Tuesday that there were a record 11.5 million job openings at the end of March.

The contraction, together with a slowdown in factory employment growth last month, could temper expectations for strong job gains in April. According to a Reuters survey of economists, nonfarm payrolls likely increased by 394,000 jobs last month after rising 431,000 in March.

The ISM survey's measure of supplier deliveries increased to 65.1 from 63.4 in March. A reading above 50% indicates slower deliveries. As a result, services inflation accelerated. A measure of prices paid by services industries for inputs increased to an all-time high of 84.6 from 83.8 in March.

The Federal Reserve is expected to hike interest rates by half of a percentage point later on Wednesday, and is likely to start trimming its asset holdings soon. The U.S. central bank raised its policy interest rate by 25 basis points in March.

Uber had a successful first quarter of 2022 by some measures, as it more than doubled its revenue year-over-year to $6.85 billion. Increased demand for rides following the Omicron surge played a role, as did higher ride prices due to a shortage of drivers.

The company reported that riders took 1.71 billion trips last quarter, an increase of 18 percent from the first three months of 2021. Gross bookings (the total amount Uber receives from customers) for rides increased by 58 percent year over year to $10.7 billion. Delivery gross bookings rose by 12 percent to $13.9 billion. Uber's revenue from rides was $2.52 billion. From deliveries, it earned $2.51 billion in revenue.

However, Uber's net loss increased from $108 million in Q1 2021 to $5.93 billion last quarter. That's largely due to its equity investments in Didi, Grab Holdings and Aurora Innovation. Still, Uber believes it will be cash-flow positive on a full-year basis for 2022.

Growth is expected to continue this quarter. Uber claims the value of rides booked in April surpassed 2019 levels, for one thing. The company also noted that rider wait times and surge trips were at their best levels for a year.

Uber says that many drivers have opted to move over to Eats deliveries. CEO Dara Khosrowshahi said the company won't have to make "significant incremental incentive investments” to keep drivers on the platform and persuade new and lapsed drivers to get behind the wheel. The same can't be said for rival Lyft.

That company expects it will need to spend more to entice drivers to return or join its platform. It's taking longer than expected for its driver base to return to pre-pandemic levels, Lyft president John Zimmer told Reuters. Uber has a leg up on Lyft in this regard, since its drivers can choose to deliver food and other items instead of ferrying passengers around. However, Lyft didn't provide more details of how much it will spend on driver incentives.

Lyft earned revenue of $875.6 million for the first quarter, a year-over-year increase of 44 percent. It had a net loss of $196.9 million, down significantly from the $427.3 million net loss it posted a year earlier. Its active number of riders rose to 17.8 million from 13.5 million in Q1 2021.

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