Job Market Shifts into Lower Gear as Wages Grow at Sluggish Pace
The latest employment report from ADP reveals a notable slowdown in private sector job creation, with wages increasing at their slowest rate in nearly three-and-a-half years. In December, companies added a seasonally adjusted 122,000 jobs, a significant drop from November’s 146,000 and below the expected 136,000.
Wage Growth Hits a Snag
The sluggish wage growth is a key takeaway from the report, with pay increasing at a 4.6% rate from a year ago – the slowest pace since July 2021. This slowdown in wage growth may alleviate concerns about inflationary pressures, which have been a focus for Federal Reserve policymakers.
Industry Insights
A closer look at the sector breakdown reveals that education and health services led the way, adding 57,000 positions. Construction, leisure and hospitality, and financial activities also saw significant gains. On the other hand, manufacturing, natural resources and mining, and professional and business services reported job losses.
Large Companies Drive Job Creation
Notably, almost all of the jobs created came from big companies with more than 500 workers, accounting for 97,000 of the total. This trend suggests that larger businesses are driving job growth, while smaller companies may be struggling to keep pace.
Implications for Monetary Policy
The ADP report comes ahead of the more closely watched nonfarm payrolls count from the Bureau of Labor Statistics, which is expected to show a gain of 155,000. Federal Reserve policymakers will be closely watching these numbers as they consider their next moves on monetary policy. With wages growing at a slower pace, the case for keeping interest rates less restrictive may be strengthened.
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