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Private Payrolls Miss Forecast in June - ADP Report Highlights

TL;DR intro

  • Job Growth:Private companies added 150,000 jobs in June, below expectations.
  • Sector Performance:Leisure and hospitality led with 63,000 new jobs.
  • Wage Trends:Wage growth slowed for those staying in their jobs, marking the smallest increase since August 2021.

According to a recent report from ADP, private sector job growth in the U.S. fell short of expectations in June. Private companies added 150,000 jobs, which is lower than the upwardly revised 157,000 in May and below the Dow Jones consensus estimate of 160,000. This marks the lowest monthly gain since January.

Sector-Specific Performance

The leisure and hospitality sector was a standout, adding 63,000 jobs, making it the largest contributor among the categories ADP tracks. Other sectors also saw growth, though to a lesser extent:

  • Construction: +27,000 jobs
  • Professional and business services: +25,000 jobs
  • Other services: +16,000 jobs
  • Trade, transportation, and utilities: +15,000 jobs

On the downside, some sectors experienced job losses:

  • Natural resources and mining: -8,000 jobs
  • Manufacturing: -5,000 jobs
  • Information: -3,000 jobs

“Job growth has been solid, but not broad-based,” noted Nela Richardson, ADP's chief economist. “Without the rebound in leisure and hospitality hiring, June would have been a disappointing month.”

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Wage Growth Slows

The report also indicated a slowdown in wage growth. For those who stayed in their jobs, wage increases fell to 4.9% on a year-over-year basis, the smallest rise since August 2021. Job switchers saw a 7.7% increase in wages, a figure that has also been declining.

The bulk of job creation came from medium-sized companies (50-499 employees), which added 88,000 jobs in June. Small businesses contributed just 5,000 jobs. Regionally, the South led the way with 80,000 new jobs, accounting for more than half of the total job gains.

Looking Ahead

ADP's report serves as a precursor to the more closely watched nonfarm payrolls report from the Labor Department, due for release on Friday. The Labor Department's report is expected to show an addition of 200,000 jobs for June, following May's addition of 272,000 jobs. Historically, ADP's figures often differ from those of the Bureau of Labor Statistics (BLS), sometimes significantly. For instance, in May, the BLS reported that private payrolls rose by 229,000, which was 72,000 more than ADP's estimate.

May Job Growth Overview

In May, private sector employment increased by 152,000 jobs, according to ADP's National Employment Report. Wage growth for job-stayers was 5.0% year-over-year, while job-changers saw a 7.8% increase. The report provides a detailed view of the labor market using anonymized payroll data from over 25 million U.S. employees.

Key highlights from May's report included:

  • Goods-producing sector: +3,000 jobs
    • Natural resources/mining: -9,000 jobs
    • Construction: +32,000 jobs
    • Manufacturing: -20,000 jobs
  • Service-providing sector: +149,000 jobs
    • Trade/transportation/utilities: +55,000 jobs
    • Information: -7,000 jobs
    • Financial activities: +28,000 jobs
    • Professional/business services: -6,000 jobs
    • Education/health services: +46,000 jobs
    • Leisure/hospitality: +12,000 jobs
    • Other services: +21,000 jobs
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June's job growth numbers suggest a slowing trend in the U.S. labor market, with significant contributions from the leisure and hospitality sector. The ADP report highlights the uneven nature of job gains and the slowdown in wage growth. As we look to the Labor Department's upcoming nonfarm payrolls report, it will be crucial to see if it aligns with ADP's findings or if there will be discrepancies once again.

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