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Private sector payrolls saw the slowest growth in over three and a half years in August, with ADP reporting that companies added just 99,000 workers during the month. This figure was lower than the revised 111,000 jobs added in July and fell short of the expected 140,000 new hires. The overall trend in the job market is pointing towards a slowdown, with various data points indicating a significant deceleration in hiring compared to the rapid pace seen post-Covid.

Despite the overall decrease in hiring, only a few sectors experienced job losses according to the ADP report. Professional and business services, manufacturing, and information services were among the industries that saw declines, while education and health services, construction, and other services reported gains in employment. Wages continued to rise, albeit at a slower rate compared to previous months.

The latest data from the Labor Department showed that initial claims for unemployment benefits dipped slightly, easing concerns of widespread layoffs. However, job openings reached their lowest point since January 2021 in July, while Challenger, Gray & Christmas reported that August had the highest number of layoffs since 2009 and the slowest pace of hiring since 2005. This slowdown in hiring is expected to weigh on the Federal Reserve’s decision-making process, with markets anticipating a possible interest rate cut at the upcoming meeting in September.

The ADP report sets the stage for the release of the nonfarm payrolls report by the Bureau of Labor Statistics, which is closely watched for insights into the overall labor market. While the two reports can vary, their data were closely aligned in July. The consensus forecast for nonfarm payrolls is an increase of 161,000, with a projected decrease in the unemployment rate to 4.2%. However, the recent slowdown in hiring could pose downside risk to these estimates.

ADP also noted a rebenchmarking of its data based on the Quarterly Census of Employment and Wages, resulting in a downward adjustment of 9,000 jobs in the August report. The Bureau of Labor Statistics similarly revised nonfarm payrolls downward by 818,000 between April 2023 and March 2024. ADP plans to conduct a full-year adjustment in February 2025.

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