ADP’s regular monthly jobs report showed a surprise uptick in hiring to close out the year, suggesting again that the labor market remains resilient but is nonetheless unlikely to add to upward inflation pressures in the coming months.
The payroll-processing group said around 164,000 jobs were created in the private sector last month, an increase from the downwardly revised tally of 103,000 in November.
Economists had expected ADP’s National Employment Report to show gains of around 115,000 as hiring slowed into the final month of the year.
Investors are also likely to focus on wage and earnings details provided in the ADP release, which showed a year-on-year increase of 5.4% for those remaining in their positions and 8% for those seeking new roles.
That puts the wage premium for changing jobs at the lowest levels in at least three years.
Those figures could prove crucial over the coming months as the Federal Reserve looks to slow the pace of wage gains, without a corresponding blunt to overall hiring, as it continues to focus on bringing inflation back to its preferred 2% target.
‘Wage-price-spiral risk’ all but gone: ADP
“We’re returning to a labor market that’s very much aligned with pre-pandemic hiring,” said ADP’s chief economist, Nela Richardson. “While wages didn’t drive the recent bout of inflation, now that pay growth has retreated, any risk of a wage-price spiral has all but disappeared.”
Earlier this week, data from the Bureau of Labor Statistics showed that November job openings fell to the lowest levels in nearly three years, with 8.7 million positions unfilled and the so-called quits rate slowing to pre-pandemic levels of around 2.1%.
“The quits rate has been a good
leading indicator of momentum in wage growth since covid, even as the relationship between wages and the
unemployment rate weakened significantly,” said Ian Shepherdson of Pantheon Macroeconomics.
“If sustained,
the drop in the quits rate is consistent with private
wage growth falling to around 3.5% by the spring, down from 4.5% in Q3 2023.”
The Labor Department will publish its benchmark nonfarm-payrolls report Friday. Investors are looking for a headline gain of around 175,000 hires to close out the year with a headline unemployment rate around 3.8%.
Action Alerts PLUS offers expert portfolio guidance to help you make informed investing decisions. Sign up now.
