US companies cut back on Hiring: Survey

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Recent private Surveys have pointed out to a fall in Hiring by US Companies in the first Quarter of the year, strengthening the belief that even after eight years of the 2008 financial crisis the economy is still not on the recovery path.

Payroll processor ADP said Wednesday that businesses added 156,000 jobs in April, down from 194,000 in March. Manufacturers shed 11,000 jobs, after losing 3,000 the previous month. Services firms added 166,000, down from 189,000.

The jobs report was one of four economic reports released Wednesday that included data about worker productivity for the first quarter, March factory orders and the Institute for Supply Management’s services index for April.

The ADP jobs report suggests that businesses tapped the brakes on hiring last month after the economy barely expanded in the first quarter. It grew just 0.5 percent at an annual rate, the weakest showing in two years. Stock prices, meanwhile, fell 15 percent at the beginning of the year. That could have also unnerved some business owners and managers and delayed hiring decisions.

“The job market appears to have stumbled in April,” Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pa., said in a statement. Moody’s produces the figures with ADP. “One month does not make a trend, but this bears close watching as the financial-market turmoil earlier in the year may have done some damage to business hiring.”

The figures come just two days before the U.S. government’s official jobs report for April. The ADP numbers cover only private businesses and often diverge from the official figures.

Daniel Silver, an economist at JPMorgan Chase, calculates that the ADP figures have deviated from the government’s by an average of 42,000 a month in the past several years.

Economists forecast that employers added 200,000 jobs in April, while the unemployment rate remained 5 percent.

Some economists cautioned against reading too much into one month’s data. Zandi argued that other recent job market figures, such as the number of people seeking unemployment benefits each week, still point to steady hiring.

The productivity of American workers fell again in the first three months of the year, while labor costs for employers rose at the fastest pace in more than a year.

Productivity declined at an annual rate of 1 percent in the January-March period, after a 1.7 percent decline in October-December quarter, the Labor Department reported Wednesday.

Productivity, the amount of output per hour of work, has been weak for a number of years. Economists worry about the consequences on American lives if it doesn’t improve. Productivity is a key ingredient needed for rising living standards. Higher productivity enables businesses to pay employees higher wages without having to raise the cost of the products and services they sell.

Labor costs rose at a rate of 4.1 percent in the first quarter, reflecting rising wages. That was the fastest increase since a 5.7 percent jump in the fourth quarter of 2014. Labor costs had been up 2.7 percent in the fourth quarter.

Laura Rosner, an economist at BNP Paribas, said that productivity growth has averaged just 0.5 percent over the past five years, compared with 2.5 percent to 3 percent growth per year in the previous expansion. She called the slowdown a “disturbing trend with negative implications for the growth outlook.”

Orders to U.S. factories advanced by a modest amount in March, reflecting stronger demand in the volatile category of defense equipment.

Factory orders rose 1.1 percent, rebounding from a 1.9 percent drop in February, the Commerce Department reported Wednesday. It was only the second increase in total orders in the past five months as American manufacturers have struggled with a weak global economy, a strong dollar and a big fall in oil prices.

A key category that serves as a proxy for business investment posted a tiny 0.1 percent rise in March after a 2.7 percent decline in February.

Without the gains in defense, which can swing widely from month to month, orders would have been up a smaller 0.2 percent in March. Excluding transportation, orders would have risen 0.8 percent.

Manufacturing has been under pressure for the past year because of global headwinds that have depressed exports and a big plunge in energy prices, which has resulted in cutbacks in spending by U.S. oil companies.

A private survey says growth accelerated in April at U.S. services companies, a potential positive for the economy after a sluggish start to 2016.

The Institute for Supply Management said Wednesday that its services index climbed to 55.7 in April, the highest level this year. The increase follows a reading of 54.5 in March. Any level above 50 signals growth.

New orders and employment measures all advanced last month, showing a stronger pace of expansion. The rate of business activity slipped in April, although that measure also pointed to continued gains.

The services index suggests that the economy might be improving slightly after an anemic opening to 2016. The U.S. economy expanded at an annual rate of just 0.5 percent during the first three months of the year, the government reported last week.

“The increase in the ISM non-manufacturing index in April suggests that growth in the much larger service sector continues to strengthen,” said Andrew Hunter, an assistant economist at Capital Economics, who said recent indicators point to the economy growing at a decent but unspectacular 2 percent this year.

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