ADP reports private sector added just 99,000 jobs in August, marking the slowest growth in 3½ years
In August, US private sector payrolls grew at their slowest pace in over 3½ years, according to ADP data reported by CNBC.
Companies added 99,000 jobs for the month, down from the revised 111,000 in July and well below the expected 140,000 forecasted by Dow Jones. This marks the lowest job growth since January 2021.
Nela Richardson, ADP’s chief economist, explained that the labour market’s decline follows two years of significant growth. “The job market’s downward drift brought us to slower-than-normal hiring after two years of outsized growth,” Richardson said.
Several indicators signal that hiring has slowed since the post-Covid-19 recovery in early 2020. A US Department of Labor report revealed that July job openings were at their lowest level since January 2021.
Additionally, outplacement firm Challenger, Gray & Christmas reported that August saw the most layoffs since 2009, making it the slowest year for hiring since the firm began tracking data in 2005.
Despite the overall slowdown, only a few sectors experienced actual job losses. The professional and business services sector lost 16,000 jobs, manufacturing saw a decline of 8,000, and information services shed 4,000 positions.
Meanwhile, some sectors saw growth. Education and health services added 29,000 jobs, construction increased by 27,000, and other services contributed 20,000 new positions. Financial activities gained 18,000 jobs, while trade, transportation, and utilities added 14,000.
Company size also played a role in the job market. Firms with fewer than 50 workers lost 9,000 jobs, while mid-sized companies, employing between 50 and 499 workers, gained 68,000 positions.
Wages continued to rise but at a slower pace, with annual pay increasing by 4.8 percent for employees who stayed in their jobs, similar to July’s rate.
The ADP report comes ahead of the more closely watched nonfarm payrolls report from the Bureau of Labor Statistics (BLS), expected Friday. Although ADP and BLS figures often differ, the two reports aligned closely in July.
The forecast for August anticipates payrolls will rise by 161,000, following a 114,000 increase in July, with the unemployment rate expected to fall to 4.2 percent. However, the recent data adds downside risk to this estimate.
Markets are watching the weakening labour market closely, expecting it to push the Federal Reserve to lower interest rates during its meeting on September 17-18.
Current market predictions suggest at least a quarter-percentage point cut, with the potential for a full percentage point reduction by the end of 2024.
ADP’s report also included a rebenchmarking adjustment, reducing August’s job count by 9,000 based on the Quarterly Census of Employment and Wages.
Similarly, the BLS revealed that nonfarm payrolls had been overcounted by 818,000 jobs between April 2023 and March 2024. ADP plans to make a full-year adjustment in February 2025.
