ADP National Employment Report shows unexpected cooling in job growth
According to the ADP National Employment Report released on Wednesday morning, hiring by U.S. companies unexpectedly cooled in November, indicating a softening labor market in the face of higher interest rates. The report revealed that companies added 103,000 jobs last month, below the predicted gain of 130,000 by economists surveyed by Refinitiv, and slightly lower than the revised increase of 106,000 recorded in October.
Impacted by Federal Reserve tightening campaign
The weaker-than-expected report follows an aggressive tightening campaign by the Federal Reserve, which has raised interest rates to the highest level since 2001. Fed officials, including Chair Jerome Powell, have suggested the possibility of at least one more rate hike this year and have indicated that rates will remain elevated as they monitor whether high inflation has truly subsided.
Wage growth continues to slow
In a potentially positive development for the Federal Reserve’s efforts to control inflation, wage growth continued to slow in November. The ADP report stated that annual pay rose by 5.6% last month, marking the 14th consecutive month of slowing growth. This is the lowest level of pay growth since September 2021. For workers who changed jobs, wages increased by 8.3%, down slightly from the previous month’s 8.4%.
Job gains in various sectors
The trade, transportation, and utilities industries saw the largest job gains in November, adding 55,000 new employees. Other sectors, including education and health services, financial activities, and information, also experienced notable increases. However, these gains were offset by losses in manufacturing, leisure and hospitality, and professional and business services.
“Restaurants and hotels were the biggest job creators during the post-pandemic recovery,” said Nela Richardson, chief economist at ADP. “But that boost is behind us, and the return to trend in leisure and hospitality suggests the economy as a whole will see more moderate hiring and wage growth in 2024.”
Upcoming release of November jobs report
The ADP National Employment Report precedes the more closely watched jobs report from the Labor Department, which is expected to be released on Friday morning. Economists anticipate that the report will show a gain of 180,000 workers hired in November, following a gain of 150,000 in October. The unemployment rate is expected to remain steady at 3.9%.
While ADP numbers can differ significantly from the official government count and have historically been an unreliable indicator of future trends, they provide a snapshot of the current state of the labor market.