WASHINGTON (Reuters) - U.S. private payrolls growth slowed sharply in July, pointing to a loss of momentum in the labor market and overall economic recovery as new COVID-19 infections spread across the country.

The ADP National Employment Report on Wednesday showed private payrolls increased by 167,000 jobs last month. Data for June was revised up to show payrolls jumping by 4.314 million jobs instead of advancing 2.369 million as previously estimated.

Economists polled by Reuters had forecast private payrolls increasing by 1.5 million in July. The ADP report, jointly developed with Moody's Analytics, was published ahead of the government's more comprehensive employment report for July scheduled for release on Friday.

“The labor market recovery slowed in the month of July,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “We have seen the slowdown impact businesses across all sizes and sectors.”

While the ADP report has a poor track record forecasting the private payrolls component of the government's employment report because of methodology differences, the step-down in job growth last month was in line with a recent pick-up in new applications for state unemployment benefits.

A survey from the Institute for Supply Management on Monday showed a measure of factory employment contracted in July for the 12th straight month even as manufacturing activity accelerated to a 16-month high.

Coronavirus cases have exploded, especially in the densely populated South and West regions where authorities in hard-hit areas are closing businesses again and pausing reopenings.

The economy suffered its biggest blow since the Great Depression in the second quarter, with gross domestic product shrinking at its steepest pace in at least 73 years. It slipped into recession in February.

According to a Reuters survey of economists, the Labor Department's closely followed employment report will likely show private employers hired 1.485 million workers in July. That would lead to a 1.6 million rise in nonfarm payrolls, a step-down from the record 4.8 million jobs created in June.

It would leave employment about 13.1 million below its pre-pandemic level. The unemployment rate is forecast falling to 10.5% from 11.1% in June.

(Reporting By Lucia Mutikani; Editing by Chris Reese)