The private sector added 164,000 jobs in December, according to the latest ADP National Employment Report released on Thursday. This far exceeded economists’ forecasts of a 150,000 gain. The report suggests the labor market remains resilient despite high inflation and interest rates.
Hiring Remains Strong Entering 2024
December marked the fourth straight month of job gains above 100,000 in the private sector. The new data bucks assumptions that hiring would significantly slow at the end of 2023 amid economic uncertainty.
While below November’s gain of 239,000 jobs, December’s growth indicates employers are still urgently looking to fill open positions. Several industries saw notable gains, especially in leisure and hospitality which added 62,000 jobs driven by restaurants and bars. Healthcare and manufacturing also posted increases.
Gains in Private Sector Industries, December 2023:
|Industry|Jobs Added|
|-|-|
|Leisure & Hospitality|62,000|
|Healthcare|49,000|
|Professional & Business Services|43,000|
|Manufacturing|8,000|
Job Market Remains Tight Across Sectors
The sustained job growth compounds an already extremely tight labor market. There were over 10 million job openings across the country entering December, meaning there were nearly two open jobs per available unemployed worker. This imbalance has driven up wages, with pay in the private sector rising another 7.3% over the past year according to ADP data.
Service-sector businesses in particular are still struggling to fill roles, especially amid seasonal demand around the holidays. Independent businesses and restaurants already dealing with thinning margins in the high inflation era have been forced to raise prices, cut hours, or leave positions unfilled. This trend will likely continue at least for the first half of 2024 if private sector hiring persists at the current pace.
Potential Signs of Slowing on the Horizon
However, there are some signals that private hiring could cool somewhat as 2023 comes to an end. Job switching, which surged to record highs for much of last year, has started to decline according to recent data. This indicates workers may be less inclined to quit their positions for new opportunities presently.
The ADP report also showed the second straight significant drop in the 12-month measure of private sector wage growth, down from a peak of 9% in June 2022 to 7.3% presently. With inflation expected to continue its descent through 2024, this tempering of wage inflation will reduce pressure on the Federal Reserve to keep aggressively raising interest rates.
Nevertheless, the cumulative effect of the Fed’s rate hikes through 2022 has not fully translated to a slowdown in actual hiring yet. Companies in general still report struggling to find qualified applicants and have yet to meaningfully cut back on recruiting efforts. This trend continuing would require further tightening by the Fed to reduce labor demand, posing ongoing risk of recession later in 2024.
December Government Jobs Report Looms Large
While encouraging for the still red-hot jobs market, the ADP report is not always fully aligned with official federal jobs data. The more influential December nonfarm payrolls report from the Labor Department arrives Friday, providing greater clarity on the health of the overall labor market.
Economists expect the government’s report will show total hiring slowed to 200,000 jobs added for the month, from 263,000 in November. The unemployment rate is forecast to hold steady at 3.6%. A significant deviation from these projections in either direction could impact financial markets and Fed policy expectations when trading resumes Monday.
Outlook Hazy but Signs of Resilience Persist
On net, strong hiring data to close 2023 defies thegloomy economic picture painted at points last year and entering the new year. Concerns over demand declines, layoffs in the tech sector, and the likelihood of mild recession continue to swirl. Yet the December ADP report demonstrates enduring tightness across huge swaths of the US labor market even in the face of these fears.
Provided demand holds up reasonably well, additional blockbuster jobs reports could be on tap this winter and spring. But all eyes turn to Friday’s nonfarm payrolls as the next barometer of whether employers plan to continue adding workers at a rapid clip through 2024’s economic turbulence.
To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.
