Fed Gets More Favorable Data In Constructive ADP Report

US private sector employers added 177,000 jobs in August, ADP said Wednesday.

That was fewer than expected, but not by enough to count as bad news in an environment where robust economic data is seen as potentially pernicious if it means prolonging the Fed’s war with inflation.

Consensus was 195,000. The range, from two dozen economists, was 125,000 to 298,000.

ADP described the slowdown as “notable.” The pace of hiring this month was the slowest since March.

Still, 177,000 hardly counts as anemic. Indeed, it’s “consistent with the pace of job creation before the pandemic,” as ADP chief economist Nela Richardson remarked on Wednesday.

Hiring was concentrated in mid-sized and large firms. Employers with 500 or more employees accounted for nearly half of the total increase for August.

Job growth in leisure and hospitality was relatively subdued at just 30,000. Other than that, the distribution looked pretty healthy. Manufacturing added 12,000 positions. No industry shed jobs, although hiring in financial activities was flat.

There was more good news on the wage growth front. The median YoY change in annual pay for so-called “job changers” (or “switchers,” if you prefer) was just 9.5%. That was the first single-digit reading in two years. Median pay growth for “job stayers” fell below 6% for the first time since September of 2021.

The reward for switching jobs narrowed to just 3.6ppt. It was as high as 8.8ppt in April of 2022. The last time it sported a three-handle was May of 2021.

All of that’s consistent with the JOLTS figures from Tuesday which reflected fewer openings and fewer quits.

You can make of the numbers what you will, but this is what normalization looks like. To me, the ADP update was another favorable report for the Fed.

Richardson underscored the point. “After two years of exceptional gains tied to the recovery, we’re moving toward more sustainable growth in pay and employment as the economic effects of the pandemic recede,” she said.


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