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U.S. Private Sector Job Growth Slows Substantially In July

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Private sector job growth in the U.S. showed a substantial slowdown in the month of July, according to a report released by payroll processor ADP on Wednesday.

ADP said private sector employment rose by 167,000 jobs in July after soaring by an upwardly revised 4.314 million jobs in June.

Economists had expected employment to surge up by another 1.5 million jobs compared to the 2.369 million job spike originally reported for the previous month.

"The labor market recovery slowed in the month of July," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "We have seen the slowdown impact businesses across all sizes and sectors."

The relatively modest increase in private sector employment came as employment in the service-providing sector climb by 166,000 jobs.

Meanwhile, the report said employment in the goods-producing sector inched up by just 1,000 jobs, as an uptick in manufacturing jobs was largely offset by a drop in construction jobs.

Chris Low, Chief Economist at FHN Financial, said the modest increase in goods-producing jobs suggests "COVID outbreaks in factories and processing plants were a bigger problem than COVID in the general population preventing people from visiting bars and restaurants."

"Frankly, we're not sure if that's good news, bad news or just news," Low added. "From an economic standpoint, probably good as long as goods producers find ways to make the workplace safe, because it implies the service economy is more resilient than it appeared."

ADP also said employment at large businesses increased by 129,000 jobs and small businesses added 63,000 jobs, while employment at mid-sized businesses fell by 25,000 jobs.

On Friday, the Labor Department is scheduled to release its more closely watched monthly jobs report for July, which excludes both public and private sector jobs.

Economists currently expected employment to jump by about 1.6 million jobs in July after spiking by 4.8 million jobs in June. The unemployment rate is expected to dip to 10.5 percent from 11.1 percent.

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