ADP Reports Lower-Than-Expected Private Payroll Growth for June

Private Payrolls See Slower Growth in June

Private payroll growth slowed in June, signaling a potential cooling of the U.S. labor market. According to ADP’s report released on Wednesday, companies added 150,000 jobs in June, down from the revised 157,000 in May and below the Dow Jones estimate of 160,000. This marks the lowest monthly gain since January.

Key Sector Performances

The leisure and hospitality sector led the gains, adding 63,000 jobs. This sector’s surge significantly bolstered the overall employment figures. Without this boost, the job addition numbers would have been much lower. Other sectors showing job increases included:

• Construction: 27,000 jobs
• Professional and Business Services: 25,000 jobs
• Other Services: 16,000 jobs
• Trade, Transportation, and Utilities: 15,000 jobs

Conversely, several sectors experienced declines:

• Natural Resources and Mining: -8,000 jobs
• Manufacturing: -5,000 jobs
• Information: -3,000 jobs

ADP’s chief economist, Nela Richardson, highlighted that while job growth has been solid, it has not been widespread. “Had it not been for a rebound in hiring in leisure and hospitality, June would have been a downbeat month,” she said.

Wage Growth and Job Creation Factors

The pace of wage increases for those staying in their jobs also slowed, with a year-over-year rise of 4.9%, marking the smallest increase since August 2021. For job switchers, wage growth was at 7.7%, continuing a downward trend.

Job creation was most prominent among mid-sized companies (50-499 employees), which added 88,000 jobs. Small businesses contributed just 5,000 jobs. Geographically, the South led with 80,000 new jobs, accounting for more than half of the total growth.

Looking Ahead to Nonfarm Payrolls Report

ADP’s report often serves as a precursor to the more comprehensive nonfarm payrolls data from the Labor Department, which is due on Friday. The upcoming report is expected to show an addition of 200,000 jobs, following May’s 272,000. Historically, ADP’s estimates tend to be lower than the official Bureau of Labor Statistics (BLS) counts. In May, the BLS reported private payroll growth of 229,000, surpassing ADP’s figure by 72,000.

Market Forecast: Bearish Outlook for Economy

Given the slowdown in private payroll growth and the modest wage gains, the short-term outlook for the labor market appears bearish. The cooling pace of job additions, particularly outside leisure and hospitality, suggests caution among employers, potentially reflecting broader economic uncertainties. Traders should remain vigilant as the forthcoming nonfarm payrolls report may provide further insights into the labor market’s health.