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Private payrolls rose by 742,000 in April, missing expectations: ADP

Private payrolls rose less than expected in April, but still increased by the most since September as COVID-19 vaccinations and reopenings stoke economic activity.

U.S. employers added back 742,000 payrolls last month, ADP said in its closely watched monthly report on Wednesday. This followed a revised rise of 565,000 jobs in March. Consensus economists were looking for private payrolls to increase by 850,000, according to Bloomberg data.

The service-providing sector added back 636,000 jobs during the month, with the areas most deeply affected by the pandemic recovering more lost payrolls. Leisure and hospitality private payrolls surged by 237,000, while trade, transportation and utilities jobs increased by 155,000. Payrolls only declined in the information industry group.

The goods-producing sector also saw more job gains, with payrolls up by 106,000 for the month as rising demand for manufactured goods helped fuel gains. Manufacturing jobs comprised most of the gain, with payrolls rising by 55,000, while construction and natural resources and mining saw payrolls rise by 41,000 and 10,000, respectively.

Economists have become increasingly upbeat on the U.S. labor market and overall economy over the past month, with vaccinations taking place expediently in the U.S. and more social distancing restrictions getting rolled back. Many consumers are flush with savings and some stimulus money left to spend from during the pandemic, leading to an accumulation of pent-up demand. New jobless claims improved to a new pandemic-era low last week and are expected to fall even further this week. And the number of individuals claiming benefits across all unemployment programs has come down sharply from its pandemic-era high.

NEW YORK, NEW YORK - APRIL 10: Customers framed by blooming flowers dine at Bin 71's outdoor sidewalk tables on the Upper West Side amid the coronavirus pandemic  on April 10, 2021 in New York City. After undergoing various shutdown orders for the past 12 months the city is currently in phase 4 of its reopening plan, allowing for the reopening of low-risk outdoor activities, movie and television productions, indoor dining as well as the opening of movie theaters, all with capacity restrictions. (Photo by Alexi Rosenfeld/Getty Images)
Customers framed by blooming flowers dine at Bin 71's outdoor sidewalk tables on the Upper West Side amid the coronavirus pandemic on April 10, 2021 in NYC. (Photo by Alexi Rosenfeld/Getty Images)

ADP's private payrolls report comes, as usual, two days before the U.S. Labor Department's "official" April jobs report on Friday. The ADP report has typically been an unreliable indicator of the results in the government report due to differences in survey methodology, with ADP only counting individuals on active payrolls during the survey period as employed, whereas the Labor Department includes those receiving paychecks during the survey period. Last month, the Labor Department reported that 780,000 private payrolls came back in March, whereas ADP reported just over half a million at the time.

"The pick-up in employment growth isn’t as strong as we had been expecting, especially given the recent boost to demand from the fiscal stimulus, and could be a sign that the increasingly widespread reports of labour shortages are starting to constrain hiring," Andrew Hunter, senior U.S. economist for Capital Economics, said in an email. "That said, it’s worth stressing that the initial ADP estimate has undershot the official BLS [Bureau of Labor Statistics] measure of private employment growth in 11 of the past 12 months, and sometimes by a significant margin."

"The likelihood of a strong rebound in public-sector employment, as schools reopen and fiscal aid to state and local governments feeds through, is another reason to expect that overall non-farm payrolls posted a stronger gain last month," he added.

Consensus economists are looking for the Labor Department's report this Friday to show the U.S. economy added back 995,000 non-farm payrolls in April, with 950,000 of these comprising private payrolls. The unemployment rate is expected to fall to 5.8% from 6.0%, reaching the lowest level since the start of the pandemic.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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