By Naveen Athrappully
Private sector employment grew in the United States at a slower pace than expected in November, according to the recent ADP National Employment Report.
In total, the private sector added 127,000 jobs this month, up 7.6 percent year over year, according to an ADP press release on Nov. 30. This is the smallest job creation number since January 2021. It is also well below the median forecast of a Bloomberg survey of economists, which predicted job addition to the tune of 200,000. Service-providing industries added 213,000 jobs, while goods-producing industries saw a decline of 86,000 jobs.
The Northeast saw the biggest job additions, at 158,000 workers. In the Midwest, 41,000 jobs were lost. Medium-sized establishments with 50 to 499 employees created 246,000 jobs, with large establishments losing 68,000 and small establishments losing 51,000 jobs.
“Turning points can be hard to capture in the labor market, but our data suggest that Federal Reserve tightening is having an impact on job creation and pay gains,” said Nela Richardson, chief economist at ADP, according to the release.
“In addition, companies are no longer in hyper-replacement mode. Fewer people are quitting and the post-pandemic recovery is stabilizing.”
Meanwhile, pay gains moderated this month, remaining elevated. Workers who stayed in their jobs saw a 7.6 percent increase in pay when compared to a year ago, while those who changed jobs saw their pay rise by 15.1 percent.
Latest job opening data from the U.S. Bureau of Labor Statistics (BLS) show that employers had 10.3 million open positions listed at the end of October, less than the 10.5 million estimated by an Econoday survey of economists. This indicates that the demand for labor might possibly have eased.
The unemployment rate was 3.7 percent as of October, according to Fed data. In a speech on Nov. 28, John C. Williams, president of the Federal Reserve Bank of New York, recently predicted that the rate would climb higher in 2023.
“The labor market remains remarkably tight. Hiring is robust, and we still are seeing rapid wage gains. But with growth slowing, I anticipate that the unemployment rate will climb from its current level of 3.7 percent to between 4.5 and 5.0 percent by the end of next year,” he said.
In a Nov. 14 report by the Federal Reserve Bank of Philadelphia, a weaker outlook for the American economy is predicted. The 38 forecasters surveyed in the report predict that the economy will only grow by 1 percent in the fourth quarter, down from an earlier prediction of 1.2 percent.
In the next three quarters, output growth is also projected to be slower than earlier predictions. “A higher path for the unemployment rate accompanies the outlook for growth,” it said.
Unemployment rate is expected to move up from 3.7 percent in 2022 to 4.2 percent in 2023 and remain little changed in the following couple of years.