ALBA, FLORIDA — Private sector employment growth slowed in July, with wage increases hitting a three-year low, according to a report released Wednesday by payroll processing firm ADP.
Employment numbers
The private sector added just 122,000 jobs in July, marking the slowest growth since January and falling short of June’s revised figure of 155,000. That figure also fell short of the 150,000 job gains forecast by economists polled by Dow Jones.
Wage growth trends
ADP also revealed that wages among those who remained employed rose 4.8% year over year, the lowest increase since July 2021 and a slight decline from 4.9% in June.
“With wage growth falling, the labor market is accommodating the Federal Reserve's effort to slow inflation,” said ADP Chief Economist Nela Richardson. “If inflation starts to rise again, it won't be because of jobs.”
Market reactions
Following the report, futures tied to major stock indexes posted gains, while Treasury yields declined.
Additional economic indicators
In related news, the Labor Department's Bureau of Labor Statistics reported that the labor cost index, a key measure for Fed officials, rose just 0.9% in the second quarter. That was lower than both the 1.2% increase in the first quarter and the 1% gain forecast by the Dow Jones.
These reports could potentially influence the Federal Reserve's decision to announce a rate cut at its next meeting in September.
Sector-specific employment growth
Employment growth in July was mainly recorded in trade, transportation and utilities with 61,000 new jobs and in construction with 39,000. Other sectors that saw growth were:
- Leisure and hospitality: +24,000 jobs
- Education and health services: +22,000 jobs
- Other services: +19,000 jobs
On the contrary, several sectors have recorded job losses:
- Professional and Business Services: -37,000 jobs
- Information: -18,000 jobs
- Production: -4,000 jobs
Small businesses with fewer than 50 employees also saw a decline, losing 7,000 jobs in July.
Regional employment
Geographically, job growth was most concentrated in the South, where 55,000 new jobs were created, while the Midwest saw only 17,000 job increases.
Next Job Statistics
This ADP report precedes the Department of Labor’s Bureau of Labor Statistics’ publication of nonfarm payroll numbers, which include government jobs and can often differ from the ADP report. In June, ADP figures exceeded the BLS estimate of 136,000 for private payrolls.
Economists expect employment to rise by 185,000 in July, down from 206,000 in June, while the unemployment rate is expected to hold steady at 4.1%.