Hiring in the US private sector decelerated in July but was nearly twice as high as analysts expected according to payroll firm ADP on Wednesday, signaling strength in the jobs market.
The US labor market has proven resilient even as the central bank hiked interest rates rapidly since March 2022 to cool demand — with higher lending costs making it pricier to borrow funds for activities like business expansion.
Job gains came in at 324,000 last month according to ADP, down from a revised 455,000 figure in June and well above analysts’ consensus estimate of 185,000 on Briefing.com.
Robust jobs numbers and other encouraging data points have raised hopes of a “soft landing” for the world’s biggest economy, where inflation comes down without triggering a major recession.
“The economy is doing better than expected and a healthy labor market continues to support household spending,” said ADP chief economist Nela Richardson.
Leisure and hospitality were a key area behind the strong job creation, according to ADP data, while manufacturing showed weakness.
Meanwhile, pay growth continued a “downward trend in July” as workers who changed jobs logged gains of 10.2 percent, compared to 11.2 percent reported for June.
Those who stayed in their jobs saw an increase of 6.2 percent last month, the slowest pace since November 2021, the report added.
The overall downward trend, if sustained, would be good news to officials trying to ensure that a hot labor market and wage growth does not translate into persistent cost-of-living pressures for consumers.
Looking ahead, all eyes are on the Labor Department’s employment numbers due Friday, although economist Ian Shepherdson of Pantheon Macroeconomics noted that ADP may not be a reliable indicator of the official estimates.
For now, Shepherdson said “we expect job growth to slow over the next few months,” tracking a decline in a hiring intentions measure.
