Private sector job creation in December was weaker than anticipated, with wages growing at the slowest rate in almost 3½ years, according to a report by payment processing firm ADP on Wednesday. Companies added 122,000 jobs during the month, a decrease from the 146,000 jobs added in November and below the consensus forecast of 136,000 by Dow Jones. This was the smallest increase since August. Wage growth was reported at a 4.6% rate from a year ago, the slowest pace since July 2021.
ADP’s chief economist, Nela Richardson, stated, “The labor market downshifted to a more modest pace of growth in the final month of 2024, with a slowdown in both hiring and pay gains.” Despite signs of a slowdown in hiring, there are few indications of increasing layoffs. The Labor Department reported that initial claims for unemployment insurance were at 201,000 for the week ended Jan. 4, well below the estimated 215,000 and the lowest level since February 2024.
The upcoming nonfarm payrolls count from the Bureau of Labor Statistics is highly anticipated, with economists expecting a gain of 155,000 jobs. This would represent a significant slowdown from November’s unexpectedly strong 227,000 jobs. The ADP and BLS numbers often differ, sometimes significantly. Federal Reserve policymakers are closely monitoring the job numbers as they determine their next steps for monetary policy. While most Fed officials believe the labor market is strong, they aim to maintain less restrictive interest rates to support job creation.
The ADP report indicated that job creation was most robust in the education and health services sector, adding 57,000 positions. Other notable gains were seen in construction (27,000), leisure and hospitality (22,000), and financial activities (12,000). However, some sectors experienced job losses, including manufacturing (-11,000), natural resources and mining (-6,000), and professional and business services (-5,000). The majority of jobs were added by large companies with over 500 workers, totaling 97,000.
