The latest data from ADP revealed that private sector payrolls grew at the slowest pace in over three-and-a-half years in August. The report showed that companies added just 99,000 workers to their payrolls, which was lower than the 111,000 jobs added in July and fell short of the consensus forecast of 140,000. This marks the weakest month for job growth since January 2021, highlighting a troubling trend in the labor market.
According to ADP’s chief economist, Nela Richardson, the downward drift in the job market has led to slower-than-normal hiring after two years of robust growth. The report aligns with other recent data points that indicate a significant slowdown in hiring activity since the initial surge following the Covid-19 outbreak in early 2020. Job openings reached a low point in July, while layoffs in August were the highest since 2009, making it the slowest year for hiring since 2005.
Although hiring has decelerated across various sectors, only a few industries reported actual job losses in August. Professional and business services saw a decline of 16,000 jobs, manufacturing lost 8,000 positions, and information services dropped by 4,000. On a more positive note, education and health services added 29,000 jobs, construction saw an increase of 27,000, and other services contributed 20,000. Additionally, financial activities and trade, transportation, and utilities experienced gains of 18,000 and 14,000 jobs, respectively.
Despite the challenges in the labor market, wages continued to rise in August, albeit at a slower pace compared to earlier gains. Annual pay increased by 4.8% for employees who remained in their roles, a trend consistent with July’s figures. The data from ADP sets the stage for the release of the nonfarm payrolls report by the Bureau of Labor Statistics, which is expected to show an increase in payrolls and a slight dip in the unemployment rate.
The latest report from ADP highlights the ongoing struggles in the labor market, with sluggish job growth and industry-specific challenges contributing to the overall economic uncertainty. As policymakers and market participants await further data, the focus remains on how the Federal Reserve will respond to the weakening jobs picture and the potential impact on interest rates and monetary policy moving forward.
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