Private sector companies added 122,000 jobs in December, less than expected, ADP says

Private sector job creation fell more than expected in December, while wages grew at the slowest pace in nearly three and a half years, payments processing company ADP reported Wednesday.

Companies added a seasonally adjusted 122,000 jobs during the month, down from 146,000 additions in November and less than the Dow Jones consensus forecast of 136,000. It was the smallest increase since August.

Regarding wages, wages grew at a rate of 4.6% compared to the previous year, the slowest pace since July 2021.

“The labor market slowed to a more modest pace of growth in the final month of 2024, with a slowdown in both hiring and wage increases,” said ADP Chief Economist Nela Richardson.

Although there are signs that hiring is slowing, there has been little indication that layoffs are increasing.

The Labor Department reported Wednesday that initial claims for unemployment insurance totaled just 201,000 for the week ending Jan. 4. That was well below the estimate of 215,000 and the lowest level since February 2024.

The reports come two days before the Bureau of Labor Statistics’ closely watched nonfarm payrolls count. Economists surveyed by Dow Jones expect that report to show a gain of 155,000 points, which in itself would mark a sharp slowdown from November’s unexpectedly strong 227,000. ADP and BLS numbers often differ, sometimes by large margins.

Federal Reserve policymakers are watching employment numbers closely as they plot their next steps on monetary policy. While most Fed officials have said they believe the labor market is strong, they are seeking to keep interest rates less restrictive so as not to threaten job creation.

They have also expressed more confidence that inflation has stabilized, although it is still above the Federal Reserve’s 2% target. The ADP figures could reinforce the idea that wages are not putting pressure on inflation.

From a sectoral point of view, job creation was strongest in the education and health services category, which added 57,000 positions. Other significant gains occurred in construction (27,000), leisure and hospitality (22,000) and financial activities (12,000).

Several sectors reported job losses, including manufacturing (-11,000), natural resources and mining (-6,000), and professional and business services (-5,000).

Almost all of the jobs came from large companies with more than 500 workers, which amounted to 97,000.