December private payrolls contracted for the first time since the early days of the coronavirus pandemic, according to an ADP report.
The 123,000 decline provided a signal that the U.S. economy had cooled considerably by the end of 2020. Economists surveyed by Dow Jones expected growth of 60,000.
The December decline offset seven consecutive months of employment growth that came out of the massive avenues established in March and April as large swathes of the U.S. economy closed to combat the spread of Covid-19. .
The companies laid off 19.4 million net workers in April and have recovered 9.9 million since then, according to ADP estimates, which have sometimes differed widely from the Department of Labor’s official monthly payroll. The decline in December followed an increase of 304,000 in November, a revised figure lower by 3,000 compared to the initial estimate.
At the industrial level, the battered leisure and hospitality sector led the cuts by 58,000, as states and municipalities again restricted indoor dining, while outdoor dining became less practical as a colder climate was established.
Almost all the layoffs came from companies employing more than 1,000 workers, as hospitality and restaurant chains downsize.
Companies in this category reduced 169,000 employees, while small businesses with less than 20 workers, which are also part of the bar and restaurant industry, reduced the number of workers by 16,000. Franchises recorded a loss of 5,300 positions and more cuts are likely to come, as Disney and Marriott announced large reductions in December.
Trade, transportation and utilities reduced staff by 50,000, while other services fell by 12,000 and intelligence services by 6,000. The manufacturing industry also lost 21,000 positions and training decreased by 1,000.
Companies with between 50 and 499 workers totaled 37,000 jobs.
Growing industries included professional and business services (+12,000), education and health services (+8,000), and construction (+3,000).
The ADP report, prepared with Moody’s Analytics, is two days ahead of the Department of Labor’s December job report, which is expected to show growth of just 50,000 jobs after the 245,000 increase in November.
For most of the pandemic, ADP estimates have been lower than the government’s final tally. Private payrolls added 344,000 in November, according to the Department of Labor, 40,000 more than the final ADP account.