- The US private sector added 132,000 new jobs in August, ADP said in its monthly hiring report.
- Economists surveyed by Bloomberg expected companies to create 200,000 payrolls.
- The report signals hiring demand started to slow through the end of summer amid waning demand.
Private-sector hiring landed below expectations in August, offering signs of a labor market slowdown amid easing demand and rising interest rates.
Private payrolls in the US rose by 132,000 through August, ADP said Wednesday in its monthly hiring report. Economists surveyed by Bloomberg held a median forecast of 200,000 new payrolls. The print also reflected a slowdown from the 270,000-payroll gain seen through July.
“This is the second consecutive month of a slowing trend we’ve seen in the news data series,” Nela Richardson, chief economist at ADP, said in a call with reporters. “These numbers suggest a shift to a more moderate pace of hiring that we expect to materialize over the course of 2022.”
The service industry counted for the bulk of the month’s job gains. Leisure and hospitality businesses added 96,000 payrolls in August, while trade, transportation, and utilities firms created 54,000 new jobs.
Goods-producing sectors broadly added jobs as well, but at a much more modest pace. Construction firms counted for the majority of the industry’s increase, adding 21,000 payrolls through the month. Natural resources and mining businesses took on 2,000 payrolls, and hiring was flat in the manufacturing sector.
The report is the first to come after a two-month hiatus for ADP’s monthly print. The firm revised its methodology for counting monthly job growth and now bases its findings solely on the payroll processing company’s aggregated data for more than 25 million workers.
The updated report also included a new pay measure that tracks the salaries of nearly 10 million employees. Average wages rose by 7.6% over the past 12 months, according to ADP, landing in line with monthly readings since the spring. While that nearly quadruples the 2% year-over-year growth seen in early 2021, the pace of pay gains has stagnated in recent months.
ADP’s release shows a worsening hiring backdrop across the US. Job creation has exceeded forecasts throughout the summer as demand for workers held steady. Yet there have been various signs that some Americans are cutting their spending amid elevated inflation. A prolonged downtrend in overall sales could prompt companies to rein in their hiring plans or even lay off workers.
The Federal Reserve’s plans for interest rates also stand in the way of stronger payroll growth. The central bank has been lifting borrowing costs at the fastest pace since the 1980s in a bid to slow growth and cool inflation, and recent price-growth data suggests the plan is working. But higher rates place greater pressure on companies with debt, and that too could curb job creation.
Fed Chair Jerome Powell hinted on Friday that worker demand will have to fade for inflation to ease up.
“There will very likely be some softening of labor market conditions,” he said. “These are the unfortunate costs of reducing inflation, but a failure to restore price stability would mean far greater pain,”