Unexpected Slowdown In Private Job Growth For January: 'The Economy Is Heading Towards A Soft Landing'

by

The pace of new hires in the U.S. private sector has slowed significantly in January 2024, indicating a cooling labor market as wage growth continues to decelerate, according to the latest ADP National Employment Report released on Wednesday. The ADP report is often seen as a precursor to the government's official jobs data due Friday.

ADP National Employment Report: Key Highlights

  • Private Sector Employment: Saw an increase of 107,000 jobs in January, a notable decrease from December's revised growth of 158,000 and below the forecasted 147,000 jobs.
  • Wage Growth Dynamics: For job stayers, annual pay increased by 5.2 percent year-over-year, slightly down from 5.4 percent in December. Meanwhile, job changers experienced a 7.2 percent rise, marking the smallest annual increase since May 2021.
  • Sector-Specific Growth: Services-providing sectors contributed 77,000 jobs, with leisure and hospitality leading the growth by adding 28,000 jobs. Goods-producing sectors added 30,000 jobs, with significant contributions from construction (22,000). Other notable sectors included trade, transportation, and utilities (23,000), education/health services (17,000), financial activities (7,000), and manufacturing (6,000), while the information sector saw a decrease, losing 9,000 jobs.
  • Business Size Contributions: Medium-sized businesses led the growth by adding 61,000 jobs. Small businesses contributed 25,000 jobs, and large businesses added 31,000 jobs.
  • Regional Job Additions: The South saw the highest growth with 57,000 new jobs, followed by the Northeast (32,000), Midwest (24,000), and West (2,000).
Nela Richardson, ADP's chief economist, remarked, "Progress on inflation has brightened the economic picture despite a slowdown in hiring and pay. Wages adjusted for inflation have improved over the past six months, and the economy looks like it's headed toward a soft landing in the U.S. and globally."

Stocks traded lower in early trading on Wednesday following dismal earnings reports from big tech companies, specifically Alphabet Inc. (NASDAQ: GOOG) (NASDAQ: GOOGL) and Advanced Micro Devices Inc. (NASDAQ: AMD).

Investors are now keenly awaiting the Federal Open Market Committee (FOMC) meeting, scheduled for 2.00 p.m., for indications of future monetary policy directions.