WASHINGTON A survey shows U.S. companies added the fewest jobs in seven months in April, indicating that government spending cuts and higher taxes may be weighing on the economy.
Payroll processor ADP said Wednesday that private employers added just 119,000 jobs last month. And March's hiring was slower than first thought: the survey shows just 131,000 added, down from an initial estimate of 158,000.
The slowdown was broad-based. Manufacturers cut 10,000 jobs, while firms in the service sector added the fewest in seven months. Construction firms added 15,000 jobs.
The ADP report is derived from payroll data and tracks private employment each month. It has diverged at times from the government's more comprehensive monthly jobs report, which will be released Friday. In March, the government said employers added 88,000 jobs, much lower than ADP's figure.
Economists forecast that the government report will show 160,000 jobs added in April. But after seeing the ADP report, many economists said the figure will likely be lower. Some are forecasting only 125,000 jobs added.
"While it cannot be said enough that the ADP report, while helpful, is hardly a perfect guide to Friday's payroll report, weakness in the number is never welcome," said Dan Greenhaus, an analyst with BTIG LLC, an institutional brokerage firm. "And by and large, that's what today's report was; weak."
Mark Zandi, chief economist at Moody's Analytics, said that hiring is being affected by an increase in Social Security taxes at the beginning of the year and across-the-board spending cuts that kicked in March 1 for the slowdown. Along with higher taxes on wealthier Americans, which also took effect Jan. 1, the tax increases and spending cuts could subtract 1.5 percentage points from growth this year, he said.
That's the biggest government drag on the economy since the end of World War II, he said. Moody's compiles the report from ADP's data.
"This is a bit disappointing, it shows the economy is growing more slowly as we go into the spring and summer," Zandi said.
The economy grew at an annual rate of 2.5 percent from January through March, the government said last week. That was an improvement from the anemic growth rate of 0.4 percent in the final three months of last year.
But most economists expect growth is slowing in the current quarter and will stay weak into the fall.