U.S. private job growth slowed sharply in July, pointing to a loss of momentum in the economy heading into the third quarter that could temper expectations of a September interest rate hike.

Other economic data on Wednesday showed a widening of the trade deficit in June as solid domestic demand in the second quarter and a strong dollar sucked in imports of food and automobiles.

"Job growth is strong, but it has moderated since the beginning of the year. Nonetheless, even at this slower pace of growth, the labor market is fast approaching full employment," said Mark Zandi, chief economist at Moody's Analytics in West Chester, Pennsylvania.

Private employers hired 185,000 workers last month, the ADP National Employment Report showed, well below economists' expectations for an increase of 215,000.

June's private payroll gains were revised down to 229,000 from the previously reported 237,000.

The report, which is jointly developed with Moody's Analytics, came ahead of the U.S. government's more comprehensive employment report on Friday. According to a Reuters survey of economists, nonfarm payrolls likely increased 223,000 last month, matching June's job gains.

Signs of a moderation in hiring and some stalling in wage growth could cast doubts on expectations that the Federal Reserve will raise rates in September. The U.S. central bank has kept its short-term interest rate near zero since December 2008.

U.S. stock index futures marginally pared gains after the data, while prices for U.S. Treasuries fell. The dollar edged up against a basket of currencies.

In a separate report, the Commerce Department said the trade deficit increased 7.1 percent to $43.8 billion, which also reflected a second straight monthly drop in exports. May's trade gap was revised to $40.9 billion from the previously reported $41.9 billion.

Economists had forecast the trade deficit rising to $42.8 billion. When adjusted for inflation, the deficit increased to $59.3 billion in June from $57.6 billion in the prior month.



The trade data likely will have a marginal impact on the second-quarter gross domestic product estimate released last week, as the deficit on the goods balance came in broadly in line with the advance figure incorporated in the GDP report.

In that report, the government estimated the economy expanded at a 2.3 percent annual pace, with trade adding 0.13 percentage point to GDP.

But following stronger-than-forecast construction and factory inventory data, economists expected GDP would be revised to as high as a 3.0 percent annual rate when the government publishes its second GDP estimate later this month.

Domestic demand grew solidly in the second quarter. The dollar, which has gained 15 percent against the currencies of the United States' main trading partners since June 2014, is also making imports cheaper.

In June, imports increased 1.2 percent to $232.4 billion. Despite firming domestic demand, some of the imports likely ended up in inventories, which remained at very high levels in the second quarter.

Imports of food and automobiles were the highest on record in June. Dollar strength and sluggish global demand crimped exports, which slipped 0.1 percent to $188.6 billion in June.

Exports to the European Union fell 2.3 percent, while imports surged 4.0 percent to a record high. That left the trade deficit with the EU at an all-time high.

Exports to Canada, one of the main U.S. trading partners, slipped 0.1 percent in June. Though exports to Mexico rose solidly, they were outpaced by a jump in imports. That put the trade deficit with Mexico at the highest level since May 2012.

U.S. exports to China increased 10.6 percent, while imports from that country rose 4.9 percent. That left the politically sensitive U.S.-China trade deficit at $31.5 billion, up 3.3 percent from May. 

By Lucia Mutikani - Reueters (Additional reporting by Richard Leong in New York; Editing by Paul Simao)