The latest report from ADP reveals that private sector payrolls experienced the weakest growth in more than three-and-a-half years in August. With only 99,000 new workers hired during the month, the figure fell short of the downwardly revised data from July and below the expected forecast. This slowdown in job growth is concerning, as it marks the weakest month for hiring since January 2021, following the unprecedented surge in employment post-Covid outbreak in early 2020.
The ADP report aligns with other recent data indicating a significant slowdown in hiring. Job openings hit a low point in July not seen since January 2021, according to the Labor Department. Additionally, outplacement firm Challenger, Gray & Christmas reported that August experienced the highest number of layoffs since 2009 and the slowest year for hiring since 2005. These indicators collectively point towards a challenging labor market landscape.
Sector-Wise Performance
While overall hiring has decelerated, specific sectors have been disproportionately impacted. Professional and business services, manufacturing, and information services reported job losses, while education, health services, construction, and other services saw employment gains. The financial activities sector and trade, transportation, and utilities also demonstrated growth in August.
Despite the weakening job market, wages continued to rise in August, albeit at a slower pace compared to previous months. Annual pay increased by 4.8% for existing employees, maintaining a similar level to July. The impending release of the nonfarm payrolls report by the Bureau of Labor Statistics is eagerly awaited, with expectations of increased payrolls and a slight decline in the unemployment rate. Market analysts anticipate that the current job market scenario could prompt the Federal Reserve to consider lowering interest rates during its upcoming meeting in September.
ADP announced a rebenchmarking of its data to align with the Quarterly Census of Employment and Wages, resulting in a downward revision of 9,000 jobs for the August report. A similar adjustment by the BLS indicated an overcount of 818,000 nonfarm payrolls between April 2023 and March 2024. Speculations about the Fed’s actions include a quarter percentage point rate cut at the September meeting and a projected total reduction of one percentage point in the federal funds rate by the end of 2024.
The recent data on private sector payrolls reflects a concerning trend of slowing job growth and heightened uncertainty in the labor market. While certain sectors show resilience, the overall landscape suggests a need for close monitoring and potential policy adjustments to support employment and economic stability.