Private-sector hiring in the US slowed more than expected in August, with employers adding just 38,000 jobs, according to payroll processor ADP. The gain was the smallest since January and fell short of the 47,000 consensus estimate from economists polled by Dow Jones. July's figure was revised upward to 46,000.
The latest data points to a labor market that is losing steam, a key consideration for the Federal Reserve as it deliberates its next policy move. The slowdown was broad-based, with most new positions concentrated in a few sectors, while several major industries shed workers.
Healthcare leads a narrow hiring advance
Education and health services were the primary drivers of job growth, adding 45,000 positions. Healthcare continues to be a resilient source of employment, supported by steady demand for medical services. Leisure and hospitality contributed 16,000 jobs, and construction added 12,000.
Outside those areas, the picture was notably weaker. Manufacturing lost 17,000 jobs, and professional and business services declined by 16,000. Natural resources and mining, along with trade, transportation, and utilities, each shed 5,000 positions.
The concentration of hiring was also evident by company size. Large firms with 500 or more employees accounted for 34,000 of the net gain, while small businesses with fewer than 50 workers added just 3,000 positions.
Wage growth holds steady
Despite the hiring slowdown, wage growth remained relatively stable. ADP introduced a new breakdown this month, separating base pay from gross pay, which includes tips, commissions, bonuses, and other compensation.
For job-stayers, base pay rose 3% year over year, unchanged from July, while gross pay increased 4.4%. Across all workers, base pay climbed 3.2% and gross pay rose 4.7%.
"Pay can tell us a lot about today's choppy hiring," said Nela Richardson, chief economist at ADP. "To understand hiring patterns, you have to look deeply into where pay growth is accelerating, where it's slowing, and for whom. Once-predictable wage growth has been overtaken by the complexities of demographic change, persistent inflation, and AI's effects on jobs."
Job openings rise, but hiring falls
Separate government data released Tuesday painted a mixed picture. The Labor Department's Job Openings and Labor Turnover Survey (JOLTS) showed job openings increased by 89,000 to 7.271 million at the end of July, with the openings rate ticking up to 4.4% from 4.3%. There were 1.05 job openings for every unemployed person, little changed from June, indicating relatively stable labor demand.
However, employers were less willing to convert those openings into hires. Hiring fell by 278,000 to 5.054 million, and the hiring rate dropped to 3.2% from 3.4%. Professional and business services accounted for much of the decline, with hiring in that sector down 188,000.
Layoffs remained contained, with employers cutting 119,000 fewer workers in July, bringing layoffs and discharges down to 1.666 million. The layoff rate fell to 1% from 1.1%. This combination of fewer hires and limited layoffs suggests a more cautious labor market rather than one undergoing widespread job destruction.
Focus shifts to Friday's payrolls report
The ADP figures come ahead of Friday's nonfarm payrolls report from the Bureau of Labor Statistics. Economists expect the official report to show an increase of 53,000 jobs in August, following a 23,000 decline in July. The unemployment rate is forecast to remain at 4.1%.
The contrast between job openings and actual hiring will be particularly important for investors. For more on why these metrics matter, see why investors track payrolls and related data. Additionally, the recent JOLTS report showed hiring slowing sharply, reinforcing the cooling trend.
As the labor market softens, market participants will be watching for any signs that could influence the Fed's rate path. The S&P 500's strong August performance may be tested if Friday's data disappoints.
This article is for informational purposes only and does not constitute financial advice.
