ADP: Federal Budget Cuts Are Finally Hurting Job Growth

Unemployment Office FeatureEven though the job market has remained surprisingly resilient after the $85 billion in across-the-board federal spending cuts that took effect March 1, businesses added a disappointing 135,000 jobs in May, reported private payroll processor ADP on Wednesday. Economists had expected the economy to add 167,000 jobs in the past month, and the fact that this target was missed indicates that the big federal budget cuts may be finally taking a toll on the labor market.

Jobless claims figures are considered a good measure of layoffs and provide the first look at the employment situation for any given month. Since reaching an all-time high of 670,000 in March of 2009, initial claims for unemployment benefits dropped to a five-year low for the week ended May 3, seeming to indicate that layoffs were back to pre-recession levels and that employers were confident enough in current economic conditions to hold onto workers. But, following the typical recovery pattern, jobless claims jumped up once again for the week ended May 10, providing another warning sign for the labor market. And, each of the Department of Labor’s following two jobless claims reports showed spikes in the number of Americans requesting unemployment benefits for the first time.

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“The softer job market this spring is largely due to significant fiscal drag from tax increases and government spending cuts,” explained Mark Zandi, chief economist of Moody’s Analytics, which helps produce ADP’s report.