Prime Highlights:
Private sector adds 122,000 jobs in December, below expectations.
Wage growth slows to 4.6% year-over-year, marking the slowest pace since July 2021.
Key Background:
Private sector job growth experienced a significant slowdown in December, according to the latest report from ADP. Companies added a seasonally adjusted 122,000 jobs for the month, marking a decline from the 146,000 jobs added in November and falling short of the Dow Jones consensus forecast of 136,000. This represents the smallest job gain since August 2024.
In addition to slower job growth, wages also grew at their slowest pace in nearly three and a half years. Pay increased by 4.6% compared to the previous year, the lowest rate since July 2021, signaling a potential easing of inflationary pressures tied to rising labor costs. Nela Richardson, ADP’s Chief Economist, noted that the labor market downshifted to a more modest pace of growth by the end of 2024, with reductions in both hiring and wage gains.
Despite this slowdown, there were few signs of rising layoffs, as initial claims for unemployment insurance remained low, totaling 201,000 for the week ending January 4. This figure was well below the anticipated 215,000 and represents the lowest level since February 2024. The Federal Reserve is closely monitoring these labor market trends as it determines future monetary policy. Though labor market strength remains a key concern for policymakers, the moderation in wage growth could signal less pressure on inflation.
Sector-wise, job creation was most notable in education and health services (57,000 jobs), construction (27,000 jobs), and leisure and hospitality (22,000 jobs). Conversely, manufacturing, natural resources, and professional services all experienced declines in employment, shedding a combined 22,000 jobs. ADP’s report precedes the upcoming nonfarm payrolls data, which economists expect will show a gain of 155,000 jobs, signaling further slowing in job growth from November’s strong performance.