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Private Companies Cut 301,000 Jobs in January

"The labor market recovery took a step back at the start of 2022," says ADP's chief economist, Nela Richardson

Payroll processing firm ADP reported on Wednesday that private companies showed job losses in January for the first time in more than a year.

The Dow Jones estimated job growth of 200,000 for January. However, private payrolls fell by 301,000 for the month. This is a marked decline from the lower revised gain of 776,000 in December. 

This is the first time ADP has reported negative job growth since December 2020.

Leisure and hospitality businesses were responsible for more than half of the decline. Companies in those sectors were responsible for over 154,000 job losses. Trade, transportation, and utilities cut another 62,000 jobs, while other services categories cut more than 23,000 jobs.

The manufacturing industry also cut about 21,000 jobs, while education and healthcare services reported a loss of over 15,000 jobs. The construction industry cut roughly 10,000 jobs.

The total aggregate breakdown of job loss shows that service-providing industries were responsible for 274,000 job losses, with goods producers cutting roughly 27,000 jobs.

“The labor market recovery took a step back at the start of 2022 due to the effect of the omicron variant and its significant, though likely temporary, impact to job growth,” said ADP’s chief economist, Nela Richardson.

ADP’s report comes only two days before the anticipated nonfarm payrolls count from the US Labor Department. 

Wall Street expects the Labor Department report to reflect a gain of just 150,000 jobs. White House officials are warning that the month’s numbers could be irregular due to omicron and statistical outcomes from the manner in which the Labor Department gathers current data.

ADP’s report likely signals a softer number for Friday’s report — but, the two counts can differ substantially. 

In December, ADP’s total showed a gain of 807,000 before revision. That number was significantly above the Bureau of Labor Statistics report of 211,000 for private payrolls and 199,000 for the total nonfarm number.

Job losses for the month were centralized at smaller, private firms, with companies that employ less than 50 people dropping 144,000 jobs. Businesses with more than 500 employees lost just 98,000, and medium-sized companies, between 100-500 employees, showed job losses of 59,000.

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