Private sector payrolls grew at the weakest pace in more than three-and-a-half years in August, with just 99,000 workers added during the month, according to data from ADP. This figure was below the Dow Jones consensus forecast of 140,000 and marked the slowest month for job growth since January 2021. ADP chief economist Nela Richardson noted that the downward drift in the job market has led to slower-than-normal hiring after two years of significant growth. Several recent data points have indicated a considerable slowdown in hiring, with job openings in July reaching their lowest point since January 2021, and outplacement firm Challenger, Gray & Christmas reporting that August was the worst month for layoffs since 2009.
Despite the overall slowdown in hiring, only a few sectors reported actual job losses in August. Professional and business services saw a decline of 16,000 jobs, manufacturing lost 8,000, and information services decreased by 4,000. However, there were gains in other sectors, with education and health services adding 29,000 jobs, construction increasing by 27,000, and financial activities seeing a gain of 18,000. The latest Labor Department data also showed a slight decrease in initial claims for unemployment benefits, indicating that widespread layoffs may not be as prevalent as feared. Companies with fewer than 50 workers reported a loss of 9,000 jobs, while those with between 50 and 499 workers added 68,000.
While wages continued to rise, the pace of increase has shown signs of easing compared to earlier gains. Annual pay increased by 4.8% for workers who remained in their jobs, a similar level to July. The ADP data, which serves as a precursor to the more closely watched nonfarm payrolls report released by the Bureau of Labor Statistics, aligns closely with July’s figures. The consensus forecast for the nonfarm payrolls report was an increase of 161,000 jobs in August, with a slight decrease in the unemployment rate to 4.2%. However, recent data indicating a weakening job market could pose downside risks to these estimates.
The weakening jobs picture is expected to prompt the Federal Reserve to lower interest rates at its meeting on September 17-18. Market expectations suggest at least a quarter percentage point cut at this month’s meeting, with a total rate reduction of a full percentage point by the end of 2024. ADP noted that it conducted a rebenchmarking of its data based on the Quarterly Census of Employment and Wages, resulting in a decline of 9,000 jobs in its August report. The Bureau of Labor Statistics also made a similar adjustment, indicating an overcounting of 818,000 nonfarm payrolls between April 2023 and March 2024. ADP plans to make a full-year adjustment in February 2025.
