Labor market still going strong at the end of 2023.
The numbers: Businesses added a solid 164,000 new jobs in December, paycheck company ADP said, in a sign the U.S. labor market remains fairly robust.
The increase was the biggest in four months. Economists polled by the Wall Street Journal had forecast a gain of 130,000.
The ADP payroll estimate is not an accurate predictor of the government’s official employment report that follows a few days later, but both surveys move in the same direction over time.
What both reports show is that there is a broad slowdown in hiring, but that companies are still adding workers because of steady demand for their goods and services.
The government on Friday is expected to report that 170,000 new jobs were created in December. The official report includes government workers, which ADP’s does not.
Key details: ADP said most of the new jobs in December were created by restaurants, hotels, healthcare providers and educational institutions. Construction companies also added employees.
Workers who’ve stayed in the same job earned a 5.4% increase in pay in the 12 months ended in December, ADP said. That’s down from 5.6% in the prior month.
Pay increases for people who switch jobs slipped to 8% from 8.2%.
Big picture: The labor market has lost some luster. Job openings have fallen to a nearly three-year low and hiring has slowed.
Yet unemployment remains extremely low and consumers feel confident enough to keep spending. That could be enough to keep the U.S. out of recession despite high interest rates put in place by the Federal Reserve to extinguish high inflation.
Looking ahead: “Along with a softer-than-expected weekly jobless claims total, the upside surprise in ADP suggests the labor market is still on solid ground,” said Chris Larkin, managing director of trading and investing at E*TRADE.
“If tomorrow’s [job] numbers show the same kind of strength and the economy keeps rolling along, it’s fair to wonder why the Fed would be in a rush to cut rates.”
