US Private Sector Adds 122,000 Jobs In December, Fewest Since August: ADP Data

The US private sector experienced a slowdown in hiring and wage growth in December, reflecting a continued moderation in demand for workers.

According to the ADP Research Institute, employment increased by 122,000 in December, which is the smallest rise observed in four months. This follows a gain of 146,000 employment additions in November. The growth was below the median forecast of 140,000 from a Bloomberg survey of economists.

Job growth varied among different sectors. The biggest increases were seen in education and health services, construction, and leisure and hospitality. Conversely, sectors such as manufacturing, natural resources and mining, as well as professional and business services experienced declines in workforce numbers.

The December figures indicate a gradual softening of the US labor market into the new year, a trend that poses a challenge for Federal Reserve officials who must weigh this against increasing inflation concerns when determining future interest rate cuts in 2025 and beyond.

"December marked a downshift in the labor market to a more moderate growth rate, highlighted by a slowdown in hiring and wage increases," said Nela Richardson, chief economist at ADP.

The ADP report, generated in partnership with the Stanford Digital Economy Lab, revealed a further cooling in wage growth. Employees who switched jobs saw a pay increase of 7.1%, while those who remained in their positions experienced a gain of 4.6%. This is the slowest wage growth seen since mid-2021. ADP’s analysis encompasses payroll data from over 25 million private-sector workers in the US.

Regionally, job gains were primarily driven by the West, and larger companies with a workforce of 500 or more accounted for most of the job creation in December.

In additional data released by the Labor Department, initial applications for unemployment benefits fell to 201,000 for the week ending January 4, which is the lowest level since February. However, continuing claims rose to 1.87 million in the previous week. As usual, these figures can fluctuate significantly week-to-week especially during the holiday period.

The forthcoming government employment report, set for release on Friday, is anticipated to reveal a total increase in payrolls, including government jobs, of 163,000 for December, compared to a rise of 227,000 in November.

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