Job creation throughout the United States is continuing to slow as a new report shows that private payroll additions were not as high as economists had hoped for. The report, released Wednesday by payroll processing company ADP, reveals that the U.S. market added 103,000 jobs in the private sector in November.
While this may sound like a lot, it is far below the Dow Jones estimate of 128,000 jobs. It also continues a downward trend of hiring that's been ongoing over the past few months; October saw 106,000 new jobs and September just 89,000. All of the added jobs in November were in the service industry, ADP reported, comprised mostly of the trade, transportation and utilities sectors. ADP also reported an overall wage increase of 5.6% year-over-year, which marks the "slowest pace of gains since September 2021," the company reported.
But how much should we read into this data, and how precise are these figures? With 2024 around the corner, what does this jobs report mean as the economy continues to transition through the post-pandemic era?
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
What the commentators said
ADP's report may shine a light on how the labor market is continuing to evolve. "Restaurants and hotels were the biggest job creators during the post-pandemic recovery," said Nela Richardson, ADP's chief economist. "But that boost is behind us, and the return to trend in leisure and hospitality suggests the economy as a whole will see more moderate hiring and wage growth in 2024." Richardson also told Bloomberg that the downward trend is "consistent with the economy reaching a soft landing in 2024 and buoys the Federal Reserve’s efforts to tamp down inflation."
It is clear that ADP's report shows "evidence of a gradual cooling in demand for workers," Augusta Saraiva wrote for Bloomberg. While job creation remains high and inflation continues to slow, companies are "increasingly scaling back hiring amid high borrowing costs and lingering price pressures," Saraiva added.
While the Federal Reserve is likely to keep interest rates stable for the time being, the jobs report means that "confidence is also growing that interest rates could be cut as soon as the first quarter of next year," Peter Nurse wrote for Investing. This was echoed by Megan Henney for Fox Business, who noted that Federal Reserve Chair Jerome Powell has left the door open for rate hikes and "signaled that rates will remain elevated for longer as they assess whether high inflation has retreated for good."
The biggest looming unknown, though, is "whether the job market is losing steam faster than expected, especially after the wide miss relative to expectations," Chris Versace and Mark Abssy wrote for the Nasdaq index. A continually slow jobs market in 2024 "would support the soft landing narrative for the market, steeper-than-expected declines in ADP’s November data ... could flash warning signs for the vector and velocity of the economy," Versace and Abssy added.
The jobs report may not be all bad news, partially because many experts have expressed doubt about the validity of ADP as an economic indicator. As a private entity, ADP's figures are often at odds with government reports. ADP's numbers can "differ drastically from the official government count and have historically been an unreliable indicator of what's to come," Fox Business reported.
Reuters noted that the ADP report "has been a poor gauge for predicting the private payrolls count in the employment report." The outlet reported that the U.S. Labor Department is expected to declare payroll increases of 153,000 — significantly higher than the 103,000 new payrolls cited by ADP. The Labor Department's report is typically "more comprehensive and closely watched" than the ADP report, Reuters added, and a more optimistic outlook from the government could lessen the worries of some economists. The Labor Department is scheduled to release its November jobs report this Friday.
However, no matter the metrics cited, "easing labor market conditions together with ebbing inflation have led financial markets to believe that the Fed's monetary policy tightening campaign was over," Reuters added. While interest rates are likely to remain unchanged until the new year, the state of the job market is more evidence that the "U.S. central bank could cut rates as soon as next March," the outlet said.
Create an account with the same email registered to your subscription to unlock access.