US companies ramped up hiring in December and wage gains continued to cool, consistent with an outlook for sustained economic growth and diminishing inflation.
Private payrolls increased 164,000 last month, the most since August, according to figures published Thursday by the ADP Research Institute in collaboration with Stanford Digital Economy Lab. The reading came in above all but one estimate in a Bloomberg survey of economists.
The advance was led by services sectors including leisure and hospitality and education and health care, while manufacturing cut jobs for a fourth straight month. The West and the Northeast added jobs, while the South and Midwest cut positions.
The numbers highlight the resilience of the post-pandemic job market. Despite some signs of easing labor demand, firms are still hiring at a healthy pace, unemployment remains low and employees continue to enjoy above-inflation wage gains.
Thursday’s report showed further cooling in wage growth. Workers who stayed in their job saw a 5.4% median pay bump in December from a year ago, according to the report. For those who changed jobs, wages rose 8%. Both figures marked the slowest pace of increase since 2021.
“We’re returning to a labor market that’s very much aligned with pre-pandemic hiring,” Nela Richardson, chief economist at ADP, said in a statement. “While wages didn’t drive the recent bout of inflation, now that pay growth has retreated, any risk of a wage-price spiral has all but disappeared.”
The trajectory of the labor market — especially the pace of wage growth — will be key for Federal Reserve officials as they assess when to begin cutting interest rates. Minutes from the last central bank meeting released Wednesday indicated increased optimism among policymakers about the path of inflation, noting “clear progress.”
Separate data out Thursday showed initial applications for unemployment insurance fell in the final week of 2023 to 202,000, the lowest level since October. Continuing claims also declined.
The figures precede the government’s jobs report on Friday, which is projected to show private US employers added some 130,000 positions last month.
Another report released earlier Thursday suggested that labor-market cooling is largely coming in the form of weaker hiring instead of job losses: US-based employers announced some 35,000 layoffs in December, a 20% decline from a year ago and the second-lowest reading of 2023, according to Challenger, Gray & Christmas.
ADP bases its findings on payroll data covering more than 25 million US private-sector employees.
This article was provided by Bloomberg News.