Private sector job creation eased more than expected in December while wages grew at the slowest pace in nearly three-and-a-half years, as reported by payment processing firm ADP on Wednesday.
Job Creation and Wage Growth Statistics
Companies added a seasonally adjusted 122,000 jobs in December, down from 146,000 additions in November. This figure was less than the Dow Jones consensus forecast of 136,000, marking the smallest increase since August. Regarding wages, pay grew at a rate of 4.6% from a year ago, the slowest pace since July 2021.
ADP chief economist Nela Richardson stated, "The labor market downshifted to a more modest pace of growth in the final month of 2024, with a slowdown in both hiring and pay gains."
Impact on Monetary Policy and Inflation
Federal Reserve policymakers closely monitor job numbers to determine monetary policy decisions. While most Fed officials believe the labor market is solid, they aim to maintain less restrictive interest rates to support job creation. They are also cautiously optimistic about inflation stabilizing, despite being above the 2% target.
The ADP report complements the broader economic picture and could suggest that wage growth is not exerting pressure on inflation.
Sector-Specific Job Creation
Job creation was strongest in the education and health services sector, adding 57,000 positions. Other notable gains were seen in construction (27,000), leisure and hospitality (22,000), and financial activities (12,000). However, some sectors experienced job losses, including manufacturing (-11,000), natural resources and mining (-6,000), and professional and business services (-5,000).
Most job gains were reported by large companies with more than 500 workers, totaling 97,000.
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