Each month’s reading from the Labor Department’s formal Employment Situation covering unemployment and payrolls is preceded by the ADP National Employment Report. The numbers generally are not considered a perfect correlation, but one aspect that is used is the directional moves. If ADP’s payrolls are much higher than expected, then the investing community tends to expect a better Bureau of Labor Statistics (BLS) payrolls report. When ADP is much weaker, the bias for the BLS expectations tends to drop.

ADP’s report was a serious miss on expectations as private sector employment increased by only 167,000 jobs in July over June. While this is a continued jobs recovery, it is down from a gain of about 2.37 million additional payrolls in June. It also was handily short of Econoday’s 1.888 million consensus estimate.

Each monthly report is taken directly from ADP’s customer payrolls data and it is calculated on a seasonally adjusted basis similar to the monthly BLS report. That is from roughly 400,000 businesses covering roughly 23 million employees.

Small businesses added just 63,000 of the total 167,000 payroll additions in July. Medium-sized businesses of 50 to 499 total employees saw a contraction of 25,000 payrolls, and the large businesses of 500 and more employees added 129,000 payrolls.

There was a big disparity between the goods-producing and service sectors. The total job additions were only 1,000 in the goods-producing segment, versus 166,000 in the services sector.

ADP’s general view was that the labor market recovery slowed in July, and while that is obvious in the report, it was also indicated that the slowdown affected businesses across all sizes and sectors.

Econoday’s consensus estimates for the BLS report were calling for a gain of 2.0 million in total nonfarm payrolls and over 2.1 million in total private sector payrolls. Those are likely being ratcheted down after the ADP report. Econoday’s official unemployment consensus estimate is 10.5% for July after 11.1% in June. Those government figures and other data metrics will be released on Friday morning.

As noted with the ISM Services PMI report, investors seem to be focused on earnings and hopes of a vaccine more than a slowing jobs market. The Dow Jones industrials were last seen up 270 points at 27,099, and the tech-heavy Nasdaq was up over 25 points at 10,966. The S&P 500 is back to within about 2% of its highs at 3,320, after nearly a 19-point gain. Treasury yields were also higher, with a three basis point pop to a 0.545% yield on the 10-year Treasury note.

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