Private Sector Job Growth in August Well Below Forecast, ADP Says

Home Depot customers walk by a "Now Hiring" sign in San Rafael, Calif., on March 8, 2024. Justin Sullivan/Getty Images

Private companies in the United States hired just 99,000 workers last month, fewer than the downward-revised 111,000 in July and well below the market expectation of 145,000, according to payroll data firm ADP.

This underperformance makes August the weakest month for job growth since January 2021, ADP said in its national employment report published Sept. 5.

“The job market’s downward drift brought us to slower-than-normal hiring after two years of outsized growth,” said Nela Richardson, ADP’s chief economist. “The next indicator to watch is wage growth, which is stabilizing after a dramatic post-pandemic slowdown.”

Despite a significant slowdown in hiring, the ADP data revealed that only a few sectors experienced actual job losses. Professional and business services declined by 16,000 jobs, manufacturing lost 8,000, and information services saw a reduction of 4,000 jobs.

On the positive side, education and health services added 29,000 jobs, construction increased by 27,000, and other services contributed 20,000. “Financial activities” saw a gain of 18,000 jobs, while trade, transportation, and utilities grew by 14,000.

By company size, those employing fewer than 50 workers reported a loss of 9,000 jobs, while companies with 50 to 499 employees saw an increase of 68,000 jobs.

When it comes to wages, the ADP reported that while wages did rise in August, the pace of growth continued to slow compared to earlier gains. Annual pay increased by 4.8 percent for those who stayed in their jobs, roughly the same level as in July.

The Sept. 5 report paints a more mixed picture of the economic outlook but could strengthen the case for the Federal Reserve to accelerate its planned interest rate cuts. Fed Chair Jerome Powell has made it clear that the central bank intends to cut its benchmark interest rate from the current 5.25–5.50 percentage range, the highest levels since 2001, at its Sept. 17–18 policy meeting.

In an essay published Sept. 4, Atlanta Federal Reserve President Raphael Bostic argued against keeping the current interest rate, warning that it could cause too much harm to employment.

“We must not maintain a restrictive policy stance for too long,” Bostic wrote. “I believe we cannot wait until inflation has actually fallen all the way to 2 percent to begin removing restriction because that would risk labor market disruptions that could inflict unnecessary pain and suffering.”