US Markets
Thursday, January 4th, 2024 4:28 pm EDT
Key Points
- Strong Private Sector Hiring in December: The key highlight of the article is the faster-than-expected pace of hiring in the private sector in December, marking a robust end to a resilient U.S. job market in 2023. ADP reported a substantial rise of 164,000 private payrolls during the month, exceeding the downwardly revised November figures and surpassing the Dow Jones consensus estimate.
- Diverse Sectoral Contributions: The rebound in the leisure and hospitality sector played a significant role in the positive employment trend, with the addition of 59,000 positions and leading in wage gains with an annual growth rate of 6.4%. Other notable sectoral contributions include 24,000 jobs from the construction sector, 22,000 from the other services category, and 18,000 from financial activities. However, a few categories, such as manufacturing, information services, and natural resources, experienced declines in employment.
- Labor Market Dynamics and Economic Implications: The article emphasizes the overall strength of the labor market, supported by the decrease in initial jobless claims for the last week of 2023. This suggests a tight and vibrant labor market where companies are reluctant to lay off workers. Additionally, the deceleration in the pace of earnings growth is highlighted, with annual pay increases of 5.4% for those staying in their jobs and 8% for job changers. ADP’s chief economist, Nela Richardson, notes the return to a labor market aligned with pre-pandemic hiring, and she dismisses concerns about a wage-price spiral following the retreat in pay growth. The geographic and size perspectives, with the West leading in job creation and companies with fewer than 50 employees being prominent, further contribute to the nuanced understanding of the U.S. job market dynamics. The article also discusses the upcoming release of the Labor Department’s nonfarm payrolls count, emphasizing the significance of such reports for Federal Reserve officials monitoring the labor market for clues on inflation and economic balance.
In December, private sector hiring in the United States exceeded expectations, marking a robust end to the year for the resilient job market, as reported by ADP. Private payrolls experienced a substantial increase of 164,000 jobs during the month, a notable improvement from the downwardly revised 101,000 in November and surpassing the Dow Jones consensus estimate of 130,000. The labor market exhibited further strength with a decline in initial jobless claims for the last week of 2023, signifying a tight and vibrant job market where companies are hesitant to lay off workers.
The rebound in the leisure and hospitality sector played a pivotal role in the positive employment trend, contributing 59,000 new positions. Notably, hotels, restaurants, bars, and similar establishments, which suffered significantly in the early days of the Covid-19 pandemic, displayed a resurgence in job creation. This sector also led in wage gains, boasting an annual growth rate of 6.4%. The construction sector added 24,000 jobs, while the other services category, encompassing businesses like dry cleaning, contributed 22,000. Financial activities saw an increase of 18,000 jobs.
Despite the overall positive trend, some categories experienced a decline, with manufacturing losing 13,000 jobs, and both information services and natural resources and mining seeing a decline of 2,000 jobs. The pace of earnings growth decelerated, with those remaining in their jobs witnessing an annual pay increase of 5.4%, while job changers observed an 8% increase in earnings, according to ADP.
From a company size perspective, businesses with fewer than 50 employees led in job creation, adding 74,000 new jobs. Geographically, the West saw the highest increase with 109,000 new jobs, followed by the Northeast with an addition of 94,000 jobs.
ADP’s chief economist, Nela Richardson, emphasized that the labor market is returning to a state reminiscent of pre-pandemic hiring, and the recent deceleration in pay growth mitigates the risk of a wage-price spiral. These insights come a day before the release of the more closely watched nonfarm payrolls count by the Labor Department, with economists expecting December nonfarm payroll growth of 170,000, following November’s 199,000, which was nearly double the ADP estimate.
Federal Reserve officials are closely monitoring these job reports for insights into the labor market and its potential impact on inflation. According to the December meeting minutes of the Federal Open Market Committee, officials anticipate a better balance in the labor market, addressing the significant supply-demand mismatch witnessed in recent years.
In related news, the Labor Department reported a drop in initial jobless claims for the week ending December 30, totaling 202,000, down 18,000 from the previous period and below the Dow Jones estimate of 219,000. Continuing claims, which lag by a week, also fell to 1.855 million, a decline of 31,000, contradicting expectations of a softening labor market.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/01/04/private-payrolls-added-164000-in-december-beating-expectations-adp-says.html
