ADP: Private sector job creation slowed for third straight month

(TND) — Private employers added 150,000 jobs in June, according to the ADP National Employment Report released Wednesday.

And ADP, which bases its report on payroll data of client companies, showed annual pay was up 4.9%.

“Job growth has been solid, but not broad-based,” Nela Richardson, ADP’s chief economist, said in a news release. “Had it not been for a rebound in hiring in leisure and hospitality, June would have been a downbeat month.”

Service-providing sectors added 136,000 of the new jobs, led by 63,000 in the leisure and hospitality industries.

Colorado State University economist Stephan Weiler noted that June is the beginning of summer for many people, so you’d expect leisure and hospitality employment “to get a blip.”

And it’ll be interesting to see if Americans feel good enough about their personal finances this summer to funnel their hard-earned cash into leisure and hospitality services, he said.

ADP said job creation among private employers slowed for the third straight month. And the 4.9% annual pay gains for “job-stayers” was the slowest pace of growth since August 2021.

Pay gains for “job-changers” also slowed to 7.7%, according to ADP.

The May total of jobs added was revised from 152,000 to 157,000, ADP said.

The Labor Department’s monthly jobs report is coming out Friday.

The government report for May showed 272,000 jobs added to American payrolls, much higher than ADP’s figures.

Even when accounting for just private employers, which offers an apples-to-apples comparison for the ADP report, the Labor Department reported that 229,000 jobs were added in May.

The median forecast for the upcoming government report is for 200,000 more jobs.

Weiler said monthly increases of 150,000 to 200,000 jobs is more sustainable and would likely be low enough to keep the Federal Reserve from worrying about inflation spiking again.

The Fed raised its benchmark interest rate 11 times beginning in early 2022 as a lever to tame inflation.

High prices and high borrowing costs have put a clamp on Americans’ household budgets.

The Fed previously signaled several rate cuts for this year, but those have been tabled as inflation has remained stubbornly high.

The latest consumer price index, which tracks price increases with a set basket of goods, showed annual inflation at 3.3%. That’s down drastically from the 9.1% annual increase in June 2022, which marked inflation’s high point.

The personal consumption expenditures price index, which reflects what people are actually buying, last registered a 2.6% annual increase.

Both remain above the Fed’s target of 2% annual inflation.

The Fed still expects to cut interest rates this year but is split on whether that will be one or two.

Weiler expects only one, though he’s not placing any bets on that forecast.

Labor economist Aaron Sojourner said the Fed “took the labor market off boil” when it started raising interest rates.

Employer demand eased.

So far, this has slowed hiring and wage growth rates, along with consumer price inflation while maintaining a very high employment rate and a record-low layoff rate, he said via email.

“The high employment rate signals great labor market health and strength,” Sojourner said. “But if the Fed maintains high rates too long, they’ll push the economy into job destruction and real harm for working families.”