Key Takeaways
- Private employers added 99,000 jobs in August, the fewest in more than three years in a sign that the job market is slowing down.
- The ADP jobs report added to recent signals that the formerly hot job market is losing steam amid high interest rates, but economists took the figures with a grain of salt.
- The Bureau of Labor Statistics’s more comprehensive and reliable job market figures are due Friday. They could influence how steeply the Federal Reserve cuts interest rates in the coming months.
The job market continued to slow down in August if one indicator is to be believed—but that’s a pretty big if.
U.S. employers added 99,000 jobs in August, the fewest since January 2021, payroll provider ADP said in a monthly report Thursday. That was well below the 140,000 jobs that forecasters had expected, according to a survey of economists by Dow Jones Newswires and the Wall Street Journal. It was the fifth month in a row that ADP’s report has shown a decline in job growth.
The faltering job growth added to recent data showing that the labor market is slowing down significantly after years of defying economic gravity, dragged down by high interest rates for loans caused by the Federal Reserve’s campaign of anti-inflation interest rate hikes that began in 2022.
However, economists usually take the ADP figures with a grain of salt, since they don’t always show the same trends as the more reliable and comprehensive official jobs report from the Bureau of Labor Statistics, which is scheduled for release Friday.
“While this report may lower the bar to what constitutes an upside surprise in tomorrow’s Employment Situation report, there is no useful relationship between this payroll measure and the BLS measure,” Conrad DeQuadros, senior economic advisor at Brean Capital, wrote in a commentary.
How Bad Are Layoffs?
Other reports out Thursday morning showed conflicting trends. Government data suggested the labor market may not actually be as bad as July’s surprisingly bad jobs report indicated—227,000 people newly filed for unemployment last week, the Department of Labor said Thursday, down from the week before, although higher than the median forecast for 225,000 claims. That suggests employers are avoiding layoffs, even if they’re hiring fewer people.
“This important piece of the labor market puzzle is holding strong, showing companies continue to retain workers at normal levels even as demand for them softens,” Robert Frick, corporate economist at Navy Federal Credit Union, wrote in a commentary.
However, a separate report by Challenger, Gray & Christmas, a consulting firm, showed a steep increase in layoffs. Employers cut 76,000 jobs in August, nearly triple that of July, the company said Thursday. It was the most jobs cut in any August since 2020, and before that since 2009, both showing the effects of recessions.
Financial market participants and Federal Reserve policymakers are watching data on the job market more closely than usual these days ahead of the Fed’s Sept. 17-18 policy meeting. Fed officials have signaled they plan to cut the central bank’s influential Fed funds rate in the coming months as they shift their attention from fighting inflation to preventing mass unemployment. Signs of a deteriorating labor market could pressure the Fed into making steeper cuts in an effort to spur economic activity.