(Bloomberg) -- U.S. labor market data flashed mixed signals Wednesday ahead of the marquee monthly jobs report for June, with several private reports weakening while jobless claims improved.
Hiring at U.S. companies rebounded by less than forecast in June, to 102,000 jobs from a nine-year low of 41,000 in May, according to ADP Research Institute data. The Institute for Supply Management said its measure of employment growth in service industries posted the steepest drop in 16 months. Applications for unemployment benefits, meanwhile, declined for the second time in three weeks and remain near the lowest since 1969, government figures showed.
Federal Reserve policy makers are monitoring the jobs market for signs of strain as they consider whether to cut interest rates. A solid headline number Friday could dissuade them from lowering borrowing costs, while poor data could provide a green light.
Financial markets are pricing in a rate cut later this month amid uncertainty over trade policy and slowing global growth. At the same time, robust job gains in recent years and the lowest unemployment rate in a half century have been sustaining consumer spending and boosting attitudes, extending the current economic expansion that’s now the longest on record.
“Overall it’s still a tight labor market, but it’s becoming less tight," Jennifer Lee, senior economist at BMO, said by phone from Toronto. “It points to slower job gains at a time when you’re seeing slower growth across the country in almost all areas. I’m not going to hold my breath for something strong Friday."
The Labor Department’s jobs report is projected to show the unemployment rate held at 3.6%, with payrolls climbing by more than 160,000 after a subdued 75,000 gain in May.
The report from ADP showed job gains were less than almost all estimates in a Bloomberg survey of economists, whose median projection was for a 140,000 advance. The May tally was revised higher, though it remained the weakest gain since 2010. At the same time, analysts often point out that the link between ADP and the monthly government report can be tenuous.
Among other job-market indicators, Challenger Gray & Christmas Inc. reported Wednesday that announced job cuts rose about 13% in June from a year earlier. That’s the 11th straight increase, the longest streak since the last recession.
Economic growth is forecast to slow in the U.S. amid tepid global demand, a trade war with China, and a strong dollar that makes American-made goods more expensive abroad. Manufacturers have been particularly hard hit over the last year.
The ADP report also showed small-business payrolls contracted. “Coupled with the deceleration in ADP manufacturing employment growth in recent months, this suggests that trade tensions are now weighing on trend payroll growth,” Goldman Sachs Group Inc. economists wrote in a note Wednesday.
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