WASHINGTON -- A private survey shows U.S. companies added just 119,000 jobs in April, the fewest in seven months.
The report Wednesday from payroll processor ADP suggests that government spending cuts and higher taxes could be starting to weigh on the job market. And new requirements under President Barack Obama's health care law may be prompting some small and mid-size companies to hold back on hiring.
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ADP also said that hiring in March was slower than first thought: the survey shows just 131,000 added, down from an initial estimate of 158,000.
"This is a bit disappointing, it shows the economy is growing more slowly as we go into the spring and summer," said Mark Zandi, chief economist at Moody's Analytics, which compiles the report from ADP's data.
The slowdown in April 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."
Zandi 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. 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.
Health care reform may also be a reason some employers are holding back, Zandi said. Companies with 50 or more employees in 2013 have to provide insurance for their workers next year.
Firms with 20 to 49 employees have cut hiring for three straight months, from 53,000 in January to just 17,000 last month.
Hiring has also slowed in restaurants, hotels and retailers. Zandi said those are industries where health care coverage is generally lower.
Zandi said he would like to see more data before drawing a firm conclusion, but it "feels like health care is having an impact."
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.