Hiring in July fell sharply amid surge in COVID-19 cases

Payroll gains at U.S. companies slowed sharply in July, suggesting the pickup in coronavirus cases is putting the brakes on the job market and the economic recovery.

The 167,000 in business payroll gains last month followed an upwardly revised 4.31-million increase in June, according to ADP Research Institute data released Wednesday. The July increase trailed all estimates in a Bloomberg survey of economists, which had a median projection of 1.2 million. June’s payroll gain was previously reported as 2.4 million.

The sharp slowdown in payroll gains is consistent with other data that show the labor market in danger of regressing after rebounding in the months immediately following the lifting of state lockdowns on businesses. Applications for unemployment benefits have risen for two straight weeks amid a surge in coronavirus cases that has forced some rollbacks in reopening plans.

The ADP data precede the government’s jobs report Friday, which is forecast to show private payrolls increased by 1.5 million in July after a 4.8-million-job gain a month earlier. The initial ADP figures for May and

June were significantly below the Labor Department’s official tallies.

“We have seen the slowdown impact businesses across all sizes and sectors,” Ahu Yildirmaz, co-head of the ADP Research Institute, said in a statement.

Stocks climbed for a fourth day. A separate report showed U.S. service industries expanded in July at the fastest pace since February 2019 as the strongest reading yet on orders and a pickup in business activity more than offset a bigger contraction in employment.

ADP said service-provider employment rose by 166,000, while payrolls at goods producers increased by 1,000 in July. Employment in the leisure and hospitality industry, which had gained more than 3 million jobs in the prior two months, rose by just 38,000 in July.

Other recent job market indicators “have sort of flatlined over the past month, and that told us that there’s probably some slowing in the labor recovery,” said Brett Ryan, senior U.S. economist at Deutsche Bank Securities Inc.

The ADP report showed payrolls at small firms rose by 63,000 last month, while medium-size businesses shed 25,000 jobs. Payrolls at large firms rose by 129,000.

ADP’s payroll data represent firms employing nearly 26 million workers in the U.S.