US private employers cut more jobs than expected last month and the vast services sector contracted again, stoking concern about the strength of a recovery, data showed today.
In addition, US firms planned to increase layoffs in July for the first time in six months, another report showed, increasing investor anxiety about the government's unemployment report for July due on Friday.
"We're looking at a U-shaped recovery, which means getting off the bottom is going to be a lot more difficult than people are anticipating in the market," said Doug Roberts, chief investment strategist at Channel Capital Research in Shrewsbury, New Jersey.
Wall Street stocks fell, snapping a four-day winning streak, while the dollar dipped against the Japanese yen but rose against the euro.
American private employers cut 371,000 jobs last month, according to the ADP Employer Services report, jointly developed with Macroeconomic Advisers. That was less than 463,000 cuts in June but above the 345,000 job losses economists had expected for July.
Outplacement consultancy Challenger, Gray & Christmas also reported that US firms' layoff plans in July surged 31 percent compared with June, which had marked a 15-month low.
Labour market strains were evident in the services sector, which comprises 80 per cent of U.S. economic output. The Institute for Supply Management said its services index fell to 46.4 last month from 47.0 in June.
Economists had expected the number to rise to 48.0, closer to the dividing line between growth and contraction at 50. The last time the index was above 50 was August of 2008.
"This is not good news for the labour market, given the disappointing ADP reading," said Richard DeKaser, president of Woodley Park Research in Washington. "These are not good numbers in the same day."
The White House said the Labour Department report will show hundreds of thousands more lost jobs in July.