ADP private sector payrolls report for December missed street expectations with a gain of 122K, while the street was expecting 139K. This was the 3rd straight month of a slowdown in hiring, and well below the long term average (orange line) of 162K monthly.
Small businesses accounted for 5K net new jobs, while medium sized companies gained 9K. Large companies provided the bulk of the job gains for the month, adding 97K net new jobs.
If we break it down by industry type, we can see that services industries continue to carry the economy. Results:
Manufacturing: 10K net new jobs
Services: 112K net new jobs
Led by education & health services which gained 57K for the month.
Total private sector employment is now 8.2 million jobs above the COVID peak (or 6.6% higher).
The pace of job gains has clearly slowed when we look at the year over year statistics. Decembers annualized pace of job gains was 1.4%, for the 3rd straight month in a row, and the 7th straight month below the long term average (orange line).
The 3 and 12 month average both declined, with the 3 month declining 9.4K to 150,667, while the 12 month declined 3K, to 151,833.
The ADP report gives us a window into what might be expected from the government’s NFP payroll report on Friday. ADP only focuses on the private sector while NFP includes private sector and government payrolls. And since its the private sector that’s the growth driver of the economy, the health of the private sector employment changes are important. We continue to see a jobs market that is cooling off, but not in danger of shutting off. This is the sweet spot for the Fed on one of the dual mandates. The problem is the other part of the dual mandate, price stability, is stubbornly above the Fed’s target and showing signs it may be getting worse in the near term (ISM services prices paid yesterday). It’s going to be a hard needle to thread. While I don’t anticipate a repeat of double digit price inflation, I do expect plenty of bumps along the way to normalcy. It’s likely not going to be a straight line.