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U.S. private sector payrolls fell more than expected in August as the labor market continued to cool amid high interest rates, according to the ADP national employment report released Thursday morning.
Businesses added 99,000 jobs in August, according to economists from LSEG and Fewest jobs added The report showed the first decrease since January 2021. The initial report also showed a job gain of 122,000, but the July gain was revised down to 111,000.
ADP found that wage gains among workers, which can help drive inflation, were flat in August, rising just 4.8% for those who stayed in their jobs and 7.3% for those who changed jobs.
“The downward trend in the labor market has led to slower-than-usual hiring after two years of strong growth,” said Nella Richardson, ADP's chief economist. “The next indicator to watch is wage growth, which is stabilizing after a dramatic slowdown since the pandemic.”
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Private sector job gains were weaker than expected in August, with construction adding 27,000 jobs, according to ADP. (Photographer: Alison Joyce/Bloomberg via Getty Images/Getty Images)
Of the 99,000 jobs added by private employers in August, the majority were in the services industry, accounting for an increase of 72,000 jobs. Within the services sector, education and health services had the largest increase with an increase of 29,000 jobs. Financial services added 18,000 jobs, and trade, transportation and public works added 14,000 jobs.
The professional and business services sector cut 16,000 jobs, while information services lost 4,000 jobs.
Goods producers added 27,000 jobs in the construction sector, but a gain of 8,000 in natural resources and mining was offset by a loss of 8,000 jobs in manufacturing.
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The professional and business services sector saw the largest decline, losing 16,000 jobs in August. (Michael Short/Bloomberg via Getty Images/Getty Images)
Mid-sized businesses, those with 50 to 499 employees, saw the biggest job gains in August, adding 68,000 jobs. Large businesses, defined as those with 500 or more employees, added 42,000 jobs. Small businesses with fewer than 50 employees lost 9,000 jobs last month.
According to a regional breakdown in the ADP report, the majority of job gains occurred in the South, which added 55,000 jobs, the Northeast added 24,000 jobs, and the Mid-Atlantic region's 30,000 job gain was partially offset by a 6,000 job loss in New England.
The West added 20,000 jobs, 12,000 in the Pacific region and 8,000 in the Mountain Region, while the Midwest added 7,000 jobs.
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Federal Reserve Chairman Jerome Powell said in August that “the time has come” to cut interest rates, which are at their highest in 23 years, to curb inflation. (Photo by Andrew Harnick/Getty Images/Getty Images)
The ADP report comes ahead of the more closely watched Labor Department jobs report, which is due to be released Friday morning and is expected to show payrolls added 160,000 jobs in August and the unemployment rate fell slightly to 4.2%. Last month's report showed payrolls slowing to 114,000 in July and the unemployment rate unexpectedly rising to 4.3%.
The jobs report comes as the Federal Reserve is expected to announce an interest rate cut when it meets this month amid signs that inflation is heading toward the central bank's 2% target and signs of a cooling labor market.
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The Department of Labour also released a report on Thursday showing that 227,000 people filed for initial unemployment benefits last week, slightly below the 230,000 predicted by LSEG economists.
Last week's jobless claims were revised upward by 1,000 to 232,000 from 231,000.
