Private payroll job growth slowed significantly in November, evidence that the historically hot labor market is finally starting to cool off, according to the ADP National Employment Report released Wednesday morning.
Companies added just 127,000 jobs last month, missing the 200,000 gain predicted by economists surveyed by Refinitiv.
The weaker-than-expected report comes as the Federal Reserve mounts its most aggressive fight since the 1980s to tame inflation and slow the labor market with a series of rapid interest rate hikes.
“Tipping points in the labor market can be difficult to capture, but our data suggests that Federal Reserve tightening is having an impact on job creation and wage gains,” said Nela Richardson, chief economist at ADP. “In addition, companies are no longer in hyper-replacement mode. Fewer people are quitting and the post-pandemic recovery is stabilizing.”
THE FED’S WAR ON INFLATION COULD COST 1M JOBS
Most of the gains in November came from the leisure and hospitality industry, which added 224,000 new workers. Trade, transport and utilities followed with 62,000 hires, followed by education and health services with an increase of 55,000.
Meanwhile, the biggest losses were in the manufacturing industry, which saw a 100,000 drop in payroll. Professional and business services lost 77,000 jobs, and financial activities lost 34,000.
By size, only medium-sized businesses employing between 50-499 workers gained last month, with an increase of 246,000. Large firms lost 68,000 workers, while small firms, which have struggled most with the worst inflation in four decades, lost 51,000 workers.
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Despite lackluster job growth in November, the labor market saw another month of strong wage increases, according to the report, now produced in conjunction with the Stanford Digital Economy Lab. Wages increased by 7.6% in November, a slightly slower pace than the 7.7% recorded in October – a worrying development as consumers continue to face high inflation.
The data comes ahead of the release of the closely watched November jobs report on Friday morning, which is expected to show employers hired 200,000 workers after a gain of 261,000 in October. The unemployment rate is expected to hold steady at 3.7%.