The latest data released on Wednesday (December 6) in Eastern Time showed that the US ADP employment data, known as “small non-farm”, fell short of expectations for the fourth consecutive month, indicating further cooling of the labor market.
According to data released by Automatic Data Processing (ADP), private enterprises in the United States reduced their hiring scale in November. The number of ADP employees increased by 103,000, lower than the market expectation of 130,000. In addition, October’s ADP was revised down to 106,000 instead of the previously reported 113,000.
In terms of wages, with moderate job growth in November, wages increased by 5.6% year-on-year. This is the smallest increase since September 2021. The wage growth for job switchers also reached its lowest level in three years at 8.3%.
The data shows that employment growth was restrained by layoffs in manufacturing (15,000 reduction), construction (4,000 reduction), and leisure and hospitality industries (7,000 reduction). However, education and health services as well as trade transportation and financial activities drove employment growth with increases of 44k people ,55k people,and11k people respectively.
Medium-sized enterprises with a workforce between 50-249 saw the largest increase in employment numbers at around71k people while small businesses with a workforce between20-49 experienced a decrease of16k people.
This report further confirms that demand for employment is gradually cooling down. Despite continued healthy job creation and wage growth surpassing inflation again，employers are increasingly reducing recruitment scales due to high borrowing costs and persistent price pressures.
Nela Richardson，Chief Economist at ADP stated that restaurants and hotels were major creators of jobs during post-pandemic recovery period.However,this trend has passed.The decline trend seen within leisure and hospitality industry indicates that overall recruitment and wage growth will be more moderate by 2024.
Forexlive, a financial website, commented that this is a useful report for promoting “soft landing”. Employment continues to grow without contraction and wage figures are also cooling down. The US dollar has hardly been affected by these data.
Since March 2022, the Federal Reserve has raised interest rates by 525 basis points and the job market is steadily slowing down. The day before, data from the US Bureau of Labor Statistics showed that job vacancies in October reached a new two-and-a-half-year low. Specifically, there were 8.733 million job vacancies in October, resulting in a ratio of job openings to available workers at 1.3:1，the lowest level since mid-2021.
On Friday,the US Department of Labor will release the more comprehensive and closely watched November non-farm employment report.The market expects an increase of153k jobs as around33k striking members of United Auto Workers return to work.
With easing labor market conditions and declining inflation expectations,the financial markets believe that the Federal Reserve’s monetary policy tightening action has ended,and it is possible for them to cut interest rates as early as March next year.Currently investors expect the Fed to keep rates unchanged next Wednesday.