Jamie Spencer
Job Creation Falls Short of Expectations
Private sector job creation eased more than anticipated in December, according to a report by ADP. Companies added a seasonally adjusted 122,000 jobs, marking the smallest increase since August and falling below the Dow Jones consensus forecast of 136,000. This is a drop from the 146,000 jobs added in November.
Wage Growth Hits Slowest Pace Since 2021
Wage growth also decelerated, with pay increasing at an annual rate of 4.6%, the slowest pace since July 2021.
“The labor market downshifted to a more modest pace of growth in the final month of 2024, with a slowdown in both hiring and pay gains,” said ADP’s chief economist, Nela Richardson.
Layoffs Remain Low
Despite slower hiring, layoffs are not on the rise. The Labor Department reported that initial claims for unemployment insurance totaled just 201,000 for the week ending Jan. 4. This figure was significantly below the 215,000 estimate and marked the lowest level since February 2024.
Nonfarm Payrolls Report to Follow
The ADP report comes ahead of the highly anticipated nonfarm payrolls report from the Bureau of Labor Statistics, due Friday. Economists expect 155,000 job additions in December, down from November’s unexpectedly strong 227,000. The ADP and BLS figures often vary, sometimes substantially.
Fed Policy Implications
Federal Reserve policymakers are closely monitoring labor market data as they decide on future monetary policy adjustments. While officials believe the labor market remains strong, the slowing wage growth reported by ADP supports the Fed’s confidence that inflation has stabilized, even as it remains above the 2% target.
Sector Performance Highlights
Job creation was strongest in the following sectors:
- Education and Health Services: +57,000 positions
- Construction: +27,000 positions
- Leisure and Hospitality: +22,000 positions
- Financial Activities: +12,000 positions
Job losses were seen in:
- Manufacturing: -11,000 positions
- Natural Resources and Mining: -6,000 positions
- Professional and Business Services: -5,000 positions
The majority of December’s job gains came from large companies with more than 500 employees, which added 97,000 positions.
