According to the ADP report, private-sector companies hired fewer workers in August than in the past three and a half years, which shows that the market is weakening.
ADP Report on Private Sector Payrolls
Private payroll recently grew very weak. Companies in the private sector hired only 99,000 workers in August, less than the 11,000 job openings in July. According to Dow Jones’ consensus forecast, about 140,000 new jobs will be available in August, but that number has not been reached. This shows that August is the weakest month for job growth since January 2021.
ADP’s chief economist, Nela Richardson, explained that the job market has significantly drifted downward after two years of fast job growth. This report confirms several other data showing that fewer people are being hired compared to the big hiring boom after the COVID-19 pandemic started in 2020.
According to a recent Labor Department report, job openings were also at their lowest point since January 2021 in July. Another report from Challenger, Gray, and Christmas, an outplacement firm, says that August was the worst month for job layoffs since 2009.
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ADP Data
Despite the downturn, the ADP data still showed that despite the slowdown in hiring, only a few industries reported job losses. Professional and business services lost 16,000 jobs, manufacturing lost 8,000, and information services lost 4,000.
However, sectors like education, health services, construction, and financial activities still added jobs. For example, education and health services got 29,000 more jobs, construction increased by 27,000, and economic activities increased by 18,000.
Recent data from the Labor Department also helped dispel the fear of widespread layoffs. The data shows that initial claims for unemployment benefits significantly reduced to 227,000 in the last week of August, below the 229,000 that was predicted.
Companies that employ less than 50 workers reported losing 9,000 jobs, while medium-sized companies with more than 50 to 499 workers increased by 68,000 jobs. However, wages are still rising, but not as fast as they used to. According to a report from ADP, people who stay at their jobs saw their wages increase by 4.8% in a year, similar to July.
Experts think about 161,000 jobs were added in August, compared to 114,000 job openings in July. They also expect the unemployment rate to drop slightly to 4.2%. However, recent data suggests that this estimate might be a bit too high. According to the BLS, in July, private companies only added 97,000 jobs.
The Federal Reserve Lowering Interest Rates
Because the labor market seems to be slowing down, people expect the Federal Reserve to lower rates when they meet on September 17-18. The big question is how fast and how much they will cut the rates. Presently, the markets expect them to reduce rates by a quarter of a percentage point this month and by a whole percentage point by the end of 2024.
ADP mentioned that it conducted a re-benchmarking of its data based on the Quarterly Census of Employment and Wages. It found a decline of 9,000 jobs in August. A similar adjustment from the BLS shows that from April 2023 to March 2024, nonfarm private payrolls, that is, jobs not in farming, were over-counted by 818,000. ADP will update its numbers again in February 2025.
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About ADP
ADP (Automatic Data Processing) is a payroll processing firm that helps businesses pay their workers and manage employee information. One essential function of ADP is tracking the number of jobs added or lost and the change in workers’ wages.
The company gathers this information and creates reports that show the overall picture of jobs and wages in the country. These reports are helpful because they show people how the job market is doing.
It helps people know whether companies are hiring or laying off workers and how much they earn. ADP reports are essential because they come out before the government’s official jobs report and preview the economy.
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