Business

US Job Growth Drops Sharply, Signaling Worrying Trend For American Economy

No featured image available

Private employment data released Wednesday showed a huge drop in job growth in August, just days before the government releases its own job growth estimates, according to data from private payroll firm ADP.

Private employment growth dropped significantly from 371,000 private jobs in July to 177,000 in August, just days before the Bureau of Labor Statistics (BLS) is set to release its employment data, according to ADP. The numbers were below expectations, with economists expecting a drop to 200,000 for the month of July, according to MarketWatch.

“This month’s numbers are consistent with the pace of job creation before the pandemic,” Nela Richardson, chief economist for ADP, said, according to the ADP report. “After two years of exceptional gains tied to the recovery, we’re moving toward more sustainable growth in pay and employment as the economic effects of the pandemic recede.”

Data from the ADP has contrasted the BLS data in previous months, with the ADP initially recording 324,000 added jobs in July, compared to the 187,000 new jobs announced for the month by the BLS. The difference for June was even greater, with the ADP estimating 497,000 new private jobs while the BLS initially estimated 209,000 new jobs.

ADP employment change

Actual: 177K
Prior: 371K

Slam on the brakes pic.twitter.com/1p4It6SVVp

— Don Johnson (@DonMiami3) August 30, 2023

The drop compared to previous months was led by a decrease in job creation in the leisure and hospitality sector, accounting for 30,000 fewer jobs created than in the previous month, according to the ADP. Regionally, the Southern U.S. performed the best, adding 119,000 private jobs, while the Midwestern U.S. lost a total of 15,000 private jobs.

Annual pay for private employees was up by 5.9% compared to last year, according to the ADP. For those who moved jobs, it increased 9.5% for the month.

The number of private jobs added in July was revised down from 324,000 to 371,000 private jobs, according to the ADP.

Jerome Powell, chair of the Federal Reserve, said on Friday in a speech at the Jackson Hole Economic Symposium that if the labor market remains hot and economic growth persists, then the Fed would have to continue raising rates. The Fed currently has the federal funds rate sitting in a range of 5.25% and 5.50%, bringing it to the highest level since 2001 after a series of eleven rate hikes that began in March 2022.