Just as in August, the U.S. labor market experienced a major cooling down. As per ADP’s National Employment Report, private payrolls created just 54,000 positions. That number is a significant miss from the economists’ forecasts, which were expecting non-farm payrolls to rise by 75,000. The report highlights growing concerns about the economy as consumers face rising uncertainties and labor shortages, compounded by disruptions related to artificial intelligence.
Nela Richardson, chief economist at payroll processing firm ADP, said the job growth was evidence of a strong start to the year. Tougher economic conditions have since dampened even that encouraging trend.
“The year started with strong job growth, but that momentum has been whipsawed by uncertainty.” – Nela Richardson
Overall, the leisure and hospitality industry shined in the otherwise mediocre report, as the sector continued to be a consistent performer by adding 50,000 jobs in August. Even with the national economy facing headwinds, this sector has remained a bright spot. Other industries faced more significant hurdles. Even more shocking, education and health services lost 12,000 jobs. The trade, transportation, and utilities sector saw a bigger drop, losing 17,000 jobs, pointing to continued weaknesses in these sectors.
Though job growth has slowed considerably, wage growth appears to be decelerating with the exception of August’s large increase. Employees that retained their jobs saw their pay grow 4.4% from 2022 to 2023. Job turnover exploded by 7.1% over this time. This record leap indicates that there has been real change in today’s labor force.
Last week’s jobless claims figures were a shock, rising by 8,000 to reach 237,000. This adjacent placement emerges in Production and Manufacturing industries with the latest monthly figures for job growth. Economists are projecting a modest increase in the unemployment rate, to 4.3%. This number is a little more than the outdated rate of 4.2%.
As the Federal Reserve prepares for its next meeting, market analysts point to an eye popping 97.4% likelihood that they will be talking about a cut come September. This possible change is a sign of the Fed’s awareness to the changing economic circumstances and pressures on the economic landscape, especially for the labor market.