On Wednesday, ADP reported that hiring at private firms swelled unexpectedly in April, reflecting expectations of a future job market cooling.
Private payrolls increased by 296K for the month, above the declining rate of 142K for the prior month and well ahead of the Dow Jones estimate of 133K. The gain was the highest monthly increase since July 2022.
The increase comes despite the Federal Reserve’s efforts to slow economic growth and, in particular, to tame a strong labor market, which added more than 800,000 jobs this year, according to the ADP tally. The imbalance in demand with supply in the labor market has led to strong wage gains which are reflected in persistent inflationary pressures.
One positive sign for the Fed is that annual payroll has increased 6.7% over the past year, a slowdown from gains that have been consistently above 7%.
“The slowdown in wage growth gives the clearest indication of what is happening in the labor market right now,” said Nella Richardson, chief economist at ADP. “Employers are hiring aggressively while holding on to wage gains while workers are hiring on the sidelines.”
The company’s report is a precursor to the nonfarm payroll count that the Labor Department is watching closely on Friday. Economists polled by Dow Jones expect the data to show an increase of 180,000 after 236,000 in March. The two reports often differ, sometimes by large margins.
According to the ADP, the fastest job growth in April came in the leisure and hospitality sector with gains of 154K, followed by education and health services (69K) and construction (53K). Other sectors that recorded significant increases included natural resources and mining, with 52,000, and trade, transportation and utilities, which added 32,000.
The financial sector, which suffered from deposit inflows that led to the closure of three medium-sized banks, lost 28,000 jobs during the month. Manufacturing was also hit, with 38,000 fewer jobs, as the sector has been in contraction for the past six months.
Job gains were distributed fairly evenly across company size, with companies employing fewer than 500 employees contributing 243,000 in total.