Private sector US employers added nearly half a million new jobs last month, data released on Thursday suggested.
In a scorching prelude to Friday’s government report, ADP said hiring among private employers was 497,000 in June, a blockbuster beat of almost unfathomable proportions.
Consensus was nowhere close. The highest guess from three-dozen economists was 275,000. The lowest guess was 95,000.
It was the briskest pace since February of 2022, just prior to the onset of Fed hikes.
The gain was spread across small- and mid-sized firms. Businesses with less than 500 employees accounted for all of the increase.
By sector, manufacturing was the clear outlier, shedding 42,000 positions, underscoring the factory recession narrative. But that was more than offset on the goods side by nearly 100,000 new construction jobs (how’s that for a testament to voracious demand for new homes?) and a 69,000 addition in natural resources and mining.
On the services side, the picture was more mixed, but it scarcely mattered. Leisure and hospitality added nearly a quarter of a million jobs, rendering cuts across information, finance and business services irrelevant for the purposes of the headline print.
“Consumer-facing service industries had a strong June, aligning to push job creation higher than expected,” Nela Richardson, ADP’s chief economist, said Thursday.
She was quick to note that wage growth receded further in leisure and hospitality even as hiring boomed.
The pay premium for job switchers over stayers narrowed to the least since June of 2021.
That’s what you want to see if you’re in the soft landing camp, although frankly, this report was far too hot for a “Goldilocks” interpretation.
Richardson went on to suggest that “hiring likely is cresting after a late-cycle surge.”
Plainly, this pace of job creation will make the Fed uncomfortable. It’s all about the labor market, and specifically wages, and while officials will obviously welcome signs of moderation in pay growth, an NFP headline anything near Thursday’s ADP print would argue very strongly for the two additional 2023 rate hikes penciled into the dots.
Doh!