ADP data showed that private sector employment grew at its weakest pace in three-and-a-half years in August, again signaling a deterioration in the labor market.
Companies hired just 99,000 workers this month, down from July’s downward revision of 111,000 workers and below the average Dow Jones forecast of 140,000 workers.
August was the weakest month for job growth since January 2021, according to data from payroll processing companies.
“After two years of significant growth, the declining job market has caused us to hire at a slower than normal pace,” said Nela Richardson, chief economist at ADP.
The report confirms multiple recent data points showing that recruitment has slowed significantly since the onset of the COVID-19 pandemic in early 2020.
Job openings in July also hit their lowest point since January 2021, according to a report from the Labor Department on Wednesday, while outplacement firm Challenger, Gray & Christmas reported on Thursday that it was the worst 8 layoffs since 2009. month, also the company’s slowest hiring pace since it started tracking the metric in 2005.
Still, ADP data showed that only a handful of industries reported actual job losses despite a sharp slowdown in hiring. Professional and business services declined by 16,000, manufacturing fell by 8,000, and information services fell by 4,000.
The latest data from the Labor Department also helped dispel concerns about mass layoffs, with initial jobless claims falling to 227,000 in the week ended August 31, slightly below the consensus forecast of 229,000.
On the bright side, education and health services increased by 29,000, construction by 27,000 and other services by 20,000. Financial activities also rose 18,000 points, and trade, transportation and utilities rose 14,000 points.
Looking at size, companies employing fewer than 50 employees reported a loss of 9,000 employees, while companies employing 50 to 499 employees added 68,000 employees.
Wages continue to rise, but at a slower rate than some previous increases. Annual wages for those who stayed on the job rose 4.8%, about the same level as in July, according to ADP.
The ADP data now coincides with the more closely watched nonfarm payrolls report due out on Friday from the Bureau of Labor Statistics. While the two reports may differ significantly, they are almost identical to what happened in July.
Consensus forecasts for payrolls to increase by 161,000 after a gain of 114,000 in July, with the unemployment rate to edge down to 4.2%, although recent data may add some downside risks to this estimate. Private-sector employment increased by just 97,000 in July, according to the U.S. Bureau of Labor Statistics (BLS).
The market expects that weak employment conditions will prompt the Federal Reserve to cut interest rates at its meeting on September 17-18. The main question is how quickly and aggressively the Fed will act, with current market pricing pointing to a cut of at least a quarter of a percentage point at this month’s meeting and a full percentage point cut to the federal funds rate by the end of 2024.
ADP reported that it re-benchmarked its data against the quarterly census of employment and wages, which resulted in a 9,000-job decrease in employment in the August report. A similar adjustment from the Bureau of Labor Statistics showed that nonfarm employment between April 2023 and March 2024 was overestimated by 818,000 jobs.
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