Manufacturing Payrolls Plunge As Private Sector Hiring Decelerates

US private sector employers added fewer jobs than anticipated in November.

At 127,000, the headline ADP print fell well short of consensus. Economists expected 200,000.

The range of estimates, from 31 people who spent a fortune training for a career in blindfolded dart throwing, was 90,000 to 230,000. Pretty accurate, really, considering the source(s).

The miss was highly amenable to a “bad news is good news” interpretation in the context of the Fed’s efforts to cool the overheating labor market.

I’d be remiss not to note that I have reservations about this series. Following a recent revamp, some of the historical monthly prints seem difficult to square.

In any case, November’s headline represented the slowest pace of private employer job creation since a 109,000 decline in January of 2021, when COVID was raging across the US economy.

The breakdown by firm size admitted of no straightforward interpretation. Firms with 50-249 employees accounted for almost all the gains. Large firms shed 68,000 positions.

Notably (very notably, in fact), manufacturing dropped 100,000 workers (figure below)

That was the third largest monthly decline in factory employment in the history of ADP’s revamped data series.

Mercifully, leisure and hospitality hiring was strong, at 224,000, more than compensating for losses in other services sector professions, including professional and business services, finance and information.

ADP’s “pay insights” suggested ongoing moderation in pay growth, but at 15.1%, the median change in annual pay for job switchers remains very high and totally inconsistent with the Fed’s inflation mandate. The rate for job stayers was 7.6%.

The revamped ADP report is (still) too young to be amenable to real-time editorializing, but the overarching message from Wednesday’s figures was that job growth is slowing (dramatically in manufacturing apparently) and wage growth remains elevated. That’s a kind of “split decision,” if you will, for a Fed that wants to see evidence of a more balanced labor market and a wage trajectory that doesn’t risk a wage-price spiral.

“Turning points can be hard to capture in the labor market, but our data suggest that Fed tightening is having an impact on job creation and pay gains,” Nela Richardson, ADP’s Chief Economist, said. “Companies are no longer in hyper-replacement mode, fewer people are quitting and the post-pandemic recovery is stabilizing.”