According to a report by ADP on Wednesday, private payrolls shrank in December for the first time since the early days of the coronavirus pandemic.
The drop of 123,000 gave a sign that the US economy had cooled significantly by the end of 2020. Economists surveyed by Dow Jones expected growth to be 60,000.
The fall in December saw seven straight months of employment growth from the massive careers set in March and April when large parts of the U.S. economy were shut down to curb the spread of Covid-19.
Companies laid off just 19.4 million workers in April and have since recovered 9.9 million, according to ADP’s calculations, which sometimes differed greatly from the official monthly payroll of the Labor Department. The decline in December follows an increase of 304,000 in November, a number adjusted by 3,000 lower than the initial estimate.
At the industry level, the battered leisure and hospitality sector led the cut by 58,000 as states and municipalities introduced restrictions on the dining room inside, while eating outside became less practical as the cold started again.
Almost all of the layoffs come from companies employing more than 1,000 employees, as hotel and restaurant chains have fewer staff.
Enterprises in the category cut 169 000 employees, while small enterprises with less than 20 workers, also part of the bar and restaurant industry, reduced the number of persons by 16 000. Franchises had a loss of 5,300 positions and more cuts are likely to occur as Disney and Marriott announced major cuts in December.
Trade, transport and utilities reduced staff by 50,000, while the other service category was eliminated by 12,000 and the information services reduced by 6,000. Production also had a loss of 21,000 jobs and education declined by 1,000.
Companies with between 50 and 499 employees added 37,000 jobs.
Industries with growth included professional and business services (+12 000), education and health services (+8 000) and construction (+3 000).
The ADP report, compiled by Moody’s Analytics, comes two days before the Labor Department’s December work report, which is expected to grow only 50,000 jobs after the 245,000 increase in November.
Throughout most of the pandemic, ADP estimates were lower than the final government. According to the Labor Department, private payrolls added 344,000 in November, which is 40,000 higher than the final ADP score.