U.S. private-sector job growth slowed sharply in July, with ADP reporting an increase of 44,000 jobs, below the 65,000 expected by economists surveyed by Bloomberg and down from a revised 95,000 in June. The July figure was the weakest reading of the year.
The data, released Wednesday by the ADP Research Institute, suggested labor-market momentum cooled, even as wage growth remained resilient and the broader employment picture stayed relatively stable.
Hiring slows to the lowest level of the year
ADP said private payrolls rose by 44,000 in July. That was not only below the Bloomberg consensus forecast of 65,000, but also lower than every estimate submitted in the survey. It was the lowest level since January and marked a notable drop from June’s revised 95,000.
By sector, goods-producing industries lost 3,000 jobs, a sign that labor demand in parts of the real economy was under pressure.
Wage growth remains firm
While hiring slowed, wage data told a different story. Pay for workers who changed jobs climbed 7% from a year earlier, the fastest pace in nearly a year. For workers who stayed in their positions, wage growth held at 4.4%.
Nela Richardson, ADP’s chief economist, said, "The typical hiring pattern is changing, and employers are hesitating to replace departing workers as they assess the economic climate and consumer demand."
In a separate statement cited in the report, Richardson said, "Job changers, who are more sensitive to current economic conditions, drove much of the acceleration. Their strong wage gains indicate that supply constraints continue to affect pockets of the labor market." That pointed to persistent structural tightness in some areas even as overall job growth moderated.
How the report was compiled
The ADP report is based on payroll data covering more than 26 million U.S. private-sector employees and was produced jointly by the ADP Research Institute and the Stanford Digital Economy Lab.
Friday’s nonfarm payrolls report is the next focus
Before the ADP release, Federal Reserve Chair Warsh described the labor market last week as "solid" and "stable" at a press conference. The Federal Open Market Committee kept interest rates unchanged, though three officials voted in favor of a rate increase, showing that divisions within the committee remain.
Markets are now waiting for Friday’s official U.S. nonfarm payrolls report for confirmation. According to Bloomberg’s survey, economists expect July nonfarm payroll growth, including public-sector jobs, to total 80,000, an improvement from June.
If the government data tracks the same direction as the ADP report, it would reinforce the view that the labor market remains steady enough for the Federal Reserve to keep its attention on still-elevated inflation. That could have a direct effect on expectations for the Fed’s policy path.