Private sector employers added 164,000 jobs last month, as annual pay rose 5.4%, payroll giant ADP
Small businesses gained 74,000 jobs in December, including 54,000 at businesses with between one and 19 employees, and 20,000 at companies with between 20 and 49 employees. Medium establishments added 53,000 jobs, including 58,000 at businesses with between 50 and 249 employees, partially offset by a loss of 5,000 jobs at companies with between 250 and 499 employees. Large establishments with 500 or more employees gained 40,000 jobs in December.
The service-providing sector added 155,000 jobs, including 1,000 in professional and business services such as accounting and tax preparation, 18,000 in financial activities like banking, and 59,000 in leisure and hospitality, offset by a loss of 2,000 jobs in information services.
"We saw that information and professional and business services were a bit weak in December, shedding jobs in information," said ADP chief economist Nela Richardson during a conference call Thursday with reporters. "There was a little bit of a rebound in professional and business services, but not much hiring going on in either of those industries."
The goods-producing sector added 9,000 jobs, mainly in the construction industry, which added 24,000 jobs, offset by a loss of 13,000 jobs in manufacturing and 2,000 in natural resources and mining.
Annual pay growth for people who stayed in their jobs increased 5.4% in December, slowing from 5.6% a month earlier and continuing a deceleration that began in September 2022. For job changers, the rate of growth was 8.0%. In professional and business services, the rate of annual pay growth for job stayers was 5.2%.
"The premium on pay growth between job stayers and job changers has contracted quite substantially," said Richardson. "In January, that premium was 7.4%. Now as of December, it's two and a half percent, so that premium from switching jobs has narrowed considerably over the course of 2023."
She sees parallels in the
As inflation comes down, employers and workers should see some relief this year. "Inflation was driven by first supply chain woes and blockages due to the pandemic," said Richardson. "It was also accelerated by the lack of housing and high housing costs that boosted it. But wage growth was never the direct driver. What it did do, though, was keep inflation elevated. But now that we're seeing wage growth move down at this very steady clip, in our view, there's very little risk of a wage price spiral that will push up inflation in 2024. That's good news. It's good news for workers because the growth that we're seeing is more and more going to be real growth, not inflation driven growth. It's good for consumers as inflation continues to come down, and it's good for companies who don't have to fight both wage inflation and low supply on the labor side. They can actually grow their firms in 2024. I think the labor market ended 2023 on a strong note, a solid footing, and we'll see what 2024 will bring."
