US companies added more jobs than expected in December, driven by small- and medium-sized businesses, and highlighting the resilience of labor demand that’s underpinning wage growth.
(Bloomberg) — US companies added more jobs than expected in December, driven by small- and medium-sized businesses, and highlighting the resilience of labor demand that’s underpinning wage growth.
Private payrolls increased 235,000 last month after an upwardly revised 182,000 in November, according to data from ADP Research Institute in collaboration with Stanford Digital Economy Lab. The figure exceeded all but one forecast in a Bloomberg survey of economists.
Job gains were concentrated in businesses with less than 500 employees. The largest companies cut 151,000 workers from payrolls, the most since April 2020. Leisure and hospitality, education and health services, professional and business services and construction led jobs growth.
“The labor market is strong but fragmented, with hiring varying sharply by industry and establishment size,” Nela Richardson, chief economist at ADP, said Thursday in a statement. “Business segments that hired aggressively in the first half of 2022 have slowed hiring and in some cases cut jobs in the last month of the year.”
The figures suggest the labor market, while cooling in certain pockets, remains strong. Despite concerns of a looming recession, labor demand still far outstrips supply, keeping upward pressure on wages and giving consumers the wherewithal to keep spending. Layoffs also remain extremely low and openings are elevated.
Treasury yields spiked and US stock futures declined after the release.
Claims Drop
Separate data out Thursday showed US applications for unemployment benefits fell last week to the lowest since late September. In the prior week, continuing claims for those benefits also declined.
The data tend to be particularly choppy around holidays. The four-week moving average in initial claims, which smooths out some of the week-to-week volatility, dropped for the fourth week in a row.
The data from ADP precede the government’s payrolls report on Friday, which is forecast to show companies added 183,000 jobs in December. The unemployment rate is seen holding at a historically low level of 3.7%.
Read more: US Job Growth to Slow or Even Reverse After Near-Record Year
All but one region posted job growth, with the tech-heavy West shedding 142,000 positions, per ADP. Amazon.com Inc. is laying off more than 18,000 employees — the biggest reduction in its history — in the latest sign that the industry’s slump is deepening.
The report also includes a fresh look at wage growth in the month, a key focus and concern for the Fed in its inflation fight. Chair Jerome Powell has pointed to wages as the main driver of price growth in services excluding housing and energy, a leading factor in his overall inflation outlook.
In a welcome sign for the Fed, ADP’s data showed a sharp deceleration in wage growth in December. Those who changed jobs experienced a 15.2% pay increase from a year ago, the lowest in 10 months. For those who stayed at their job, the median increase in annual pay was 7.3%, down from 7.6% in the prior month.
Separate data out Wednesday illustrated how a tight labor market continues to put upward pressure on wage growth. As of November, there were about 10.5 million job openings across the economy, corresponding to 1.7 jobs for every unemployed American.
ADP, which updated its methodology last year, bases its figures on payroll data of more than 25 million US workers.
–With assistance from Jordan Yadoo.
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