Private sector job growth rises more than expected in December: ADP

Hiring by U.S. companies rose more than expected in December as the labor market remained resilient even in the face of higher interest rates, according to the ADP National Employment Report released Thursday morning.

Companies added 164,000 jobs last month, beating the 115,000 gain that economists surveyed by Refinitiv predicted. It marks the best month for job creation since August. 

The stronger-than-expected report comes in the wake of an aggressive tightening campaign by the Federal Reserve, which has hiked interest rates to the highest level since 2001. But policymakers have signaled in recent weeks that they are done raising rates amid signs that inflation is finally moderating and the economy is starting to slow.

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Workers replace power lines in Monterey Park, California, on Oct. 6.  (FREDERIC J. BROWN/AFP via Getty Images / Getty Images)

In a welcoming sign for the Fed, wage growth continued to slow in November.

Annual pay rose 5.4% last month, the 15th straight month of slowing growth, according to the report. For workers who switched jobs, wages climbed 8%, down from 8.3% the previous month.

“We’re returning to a labor market that’s very much aligned with pre-pandemic hiring,” said Nela Richardson, ADP chief economist. “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.”

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The leisure and hospitality industry drove the biggest job gains last month, adding 59,000 new employees. But there were also notable gains in other sectors, including education and health services, financial activities and construction.

Educators gather to talk to prospective hires during a hiring event for Prince George’s County school district hosted at Dr. Henry A. Wise Jr. High School in Upper Marlboro, Maryland, on Aug. 2. (Amanda Andrade-Rhoades/For The Washington Post via Getty Images / Getty Images)

The gains helped to offset job losses in manufacturing, natural resources and mining and information.

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The data precedes the release of the more closely watched December jobs report from the Labor Department on Friday morning, which is expected to show that employers hired 170,000 workers, following a gain of 199,000 in November. The unemployment rate is expected to inch higher to 3.8%.

ADP numbers can differ drastically from the official government count and have historically been an unreliable indicator of what’s to come.