Private sector job growth cools to 106,000 in January, lowest in 2 years: ADP
Job creation by US companies tumbles to lowest level since January 2021
Prosper Trading Academy CEO Scott Bauer and Muhlenkamp & Company portfolio manager Jeff Muhlenkamp discuss if January's impressive stock market gains will continue on 'The Claman Countdown.'
Hiring by U.S. companies slowed sharply in January, the latest sign that the historically tight labor market is finally starting to cool off, according to the ADP National Employment Report released Wednesday morning.
Companies added 106,000 jobs last month, missing the 178,000 gain that economists surveyed by Refinitiv predicted. It marked a major drop from the 235,000 gain recorded in December and is the worst month for job creation since January 2021.
The weaker-than-expected report comes as the Federal Reserve wages the most aggressive fight since the 1980s to crush inflation and slow the labor market with a series of rapid interest rate increases. Still, the slowdown in hiring may not be indicative of the labor market softening, but rather a one-off due to disruptions from extreme weather.
"In January, we saw the impact of weather-related disruptions on employment during our reference week," said Nela Richardson, the chief economist of ADP. "Hiring was stronger during other weeks of the month, in line with the strength we saw late last year."
US COMPANIES OFFERING RECORD-HIGH RAISES TO RETAIN WORKERS, KEEPING PRESSURE ON INFLATION
Construction workers cross a street in Wilmette, Ill., Thursday, Jan. 5, 2023. ((AP Photo/Nam Y. Huh) / AP Newsroom)
The bulk of the gains in January stemmed from the leisure and hospitality industry, which added 95,000 new workers. Other industries that saw payroll growth last month included financial activities (30,000), manufacturing (23,000) and education and health services (12,000).
The biggest losses, meanwhile, were in the trade, transportation and utilities sector, which saw payrolls decline by 41,000. Construction lost 24,000 jobs, and natural resources and mining declined by 2,000.
INFLATION STILL OUTSTRIPPING WAGES IN MOST US CITIES
By size, only large and medium businesses saw job gains last month, with a combined increase of 192,000. Small businesses – which have struggled the most with the inflation crisis – lost 75,000 workers. The losses were most pronounced in businesses that employ between one and 19 workers.
A man wearing a mask walks past a "now hiring" sign on Melrose Avenue amid the coronavirus pandemic on April 22, 2021 in Los Angeles, California. (Photo by Alexi Rosenfeld/Getty Images) (Photo by Alexi Rosenfeld / Getty Images)
With job growth relatively lackluster in January, so were the pay increases that workers received, according to the report, which is now conducted alongside Stanford Digital Economy Lab. Wages were unchanged in January from the previous month, although they are still up 7.3% from one year ago.
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The data precedes the release of the more closely watched January jobs report on Friday morning, which is expected to show that employers hired 185,000 workers following a gain of 223,000 in December. The unemployment rate is expected to edge higher to 3.6%.