US private employment dropped 123,000 in December: ADP

WASHINGTON: US private employment fell 123,000 in December, according to private data released Wednesday, a worrying sign for the economy as the coronavirus pandemic worsens.

It was the first decline since the early weeks of the Covid-19 outbreak, and payroll services firm ADP said most of the damage was in large firms with more than 1,000 employees, which shed 169,000 positions in the month.

"As the impact of the pandemic on the labor market intensifies, December posted the first decline since April 2020," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "The job losses were primarily concentrated in retail and leisure and hospitality."

Services firms lost 105,000 jobs, including 58,000 in leisure and hospitality, while manufacturing dropped 21,000, the data showed.

Businesses had been rehiring the millions of jobs cut when the pandemic hit in March and caused nationwide shutdowns, but the recovery has slowed in recent months as Covid-19 infections spiked, causing new business restrictions, and as economic stimulus measures lapsed.

The drop was much worse than economists had expected, and raises concerns that the official job report due out Friday will contain more bad news for the end of 2020.

However, the ADP report is seen as an imperfect preview of the government data, and Ian Shepherdson of Pantheon Macroeconomics said he expects the Labor Department to indicate a small increase in employment on Friday.

"The underlying story here is the impact on the services sector from the patchwork of anti-Covid measures imposed across the country in the fourth quarter, alongside people choosing to reduce their social interactions in the face of soaring infections," he said in an analysis.

But Rubeela Farooqi of High Frequency Economics said the weakening trend in the labor market is likely to continue.

"Risks to the labor market are skewed to the downside from a deteriorating health backdrop that will impact business activity," she said.