The numbers: American businesses created just 107,000 new jobs in January, paycheck company ADP said, in another sign that hiring has slowed since last fall.
Economists polled by the Wall Street Journal had forecast a gain of 150,000.
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.
Both reports show that businesses are still adding workers, but at a notably slower pace compared to the start of 2023.
The government on Friday is expected to report that 185,000 new jobs were created in January, including government workers. ADP only tracks the private sector.
Key details: ADP said most of the new jobs in January were created in leisure and hospitality, construction and transportation.
Employment fell in information, a category that includes the media.
Workers who’ve stayed in the same job earned a 5.2% increase in pay in the 12 months ended in January, ADP said. That’s down from 5.4% in the prior month and reflects a downward trend in the past year.
Pay increases for people who switch jobs slipped to 7.2% from 8%, marking the smallest increase in about two and a half years.
Big picture: Higher interest rates have failed to depress the economy as much as expected, but businesses are adding jobs more incrementally.
The rate of inflation is slowing, meanwhile, and that could spur the Federal Reserve to cut interest rates by the early summer.
One wildcard is wages. Does wage growth continue to taper off — or reaccelerate if the economy speeds up. The answer will determine how much, and how quickly, the Fed cuts rates.
Looking ahead: “Progress on inflation has brightened the economic picture despite a slowdown in hiring and pay,” said Nela Richardson, chief economist, ADP.
“Wages adjusted for inflation have improved over the past six months, and the economy looks like it’s headed toward a soft landing in the U.S. and globally,” she added.
Market reaction: The Dow Jones Industrial Average DJIA, 0.10% and S&P 500 SPX, -0.79% were set to open lower in Wednesday trading.
