Private Sector Job Growth Slows in November, Wages Show Smallest Increase in Over Two Years
Private sector job creation decelerated in November, with wages experiencing their smallest growth in more than two years, according to the latest report from ADP. Companies added only 103,000 workers during the month, slightly below the downwardly revised figure of 106,000 in October and falling short of the Dow Jones estimate of 128,000.
Modest Job Growth and Wage Increases
Accompanying the modest job growth was a 5.6% increase in annual pay, which ADP noted as the smallest gain since June 2021. Job-changers, however, saw wage increases of 8.3%, resulting in the lowest premium for switching positions since ADP began tracking the data three years ago.
Job Losses and Industry Breakdown
Leisure and hospitality, which had been leading job creation since the onset of the pandemic in early 2020, recorded a loss of 7,000 jobs in November. On the other hand, trade, transportation, and utilities saw an increase of 55,000 positions, while education and health services added 44,000 jobs, and other services contributed 15,000 jobs. Services-related industries accounted for all the job gains, as goods-producers experienced a net loss of 14,000 jobs due to declines in manufacturing (15,000) and construction (4,000).
Post-Pandemic Recovery and Job Creation
ADP chief economist Nela Richardson highlighted that restaurants and hotels were the primary job creators during the post-pandemic recovery. However, Richardson noted that this boost is now behind us, and the return to trend in leisure and hospitality suggests that the overall economy will experience more moderate hiring and wage growth in 2024.
Job Creation by Business Size and Labor Market Indicators
Companies with 50 to 499 employees led job creation, adding 68,000 positions, while small businesses contributed only 6,000 jobs. The ADP report precedes the more widely watched nonfarm payrolls count from the Labor Department by two days. Although the two reports can differ significantly, private payroll numbers were close in October, with the Labor Department reporting growth of 99,000, just 4,000 below the revised ADP tally. Including government jobs, nonfarm payrolls increased by 150,000 in October and are expected to show growth of 190,000 in November, according to Dow Jones.
Furthermore, the Labor Department's report on Tuesday revealed a decline in job openings to 8.73 million in October, the lowest level since March 2021, indicating a loosening labor market.
Implications of Slowing Private Sector Job Growth for New Business Formations
The recent deceleration in private sector job creation, coupled with the smallest wage growth in over two years, presents a challenging landscape for new businesses. According to the latest report from ADP, only 103,000 workers were added in November, falling short of the Dow Jones estimate of 128,000.
Impact of Modest Job Growth and Wage Increases
The modest job growth was accompanied by a 5.6% increase in annual pay, the smallest gain since June 2021. However, job-changers saw wage increases of 8.3%, indicating a lower premium for switching positions. This trend could impact the ability of new businesses to attract and retain talent, potentially affecting their growth and stability.
Industry Breakdown and Job Losses
Interestingly, the leisure and hospitality sector, which had been a leading job creator since the pandemic's onset, recorded a loss of 7,000 jobs in November. This shift could signal a change in consumer behavior, with potential implications for new businesses in these sectors.
Post-Pandemic Recovery and Future Job Creation
ADP's chief economist, Nela Richardson, noted that the boost from restaurants and hotels during the post-pandemic recovery is now behind us. This suggests that the economy will experience more moderate hiring and wage growth in 2024, a trend that new businesses will need to factor into their strategic planning.
Business Size, Job Creation, and Labor Market Indicators
Companies with 50 to 499 employees led job creation, adding 68,000 positions, while small businesses contributed only 6,000 jobs. This could indicate that medium-sized businesses are better positioned to navigate the current economic climate. Additionally, the decline in job openings to 8.73 million in October, the lowest level since March 2021, suggests a loosening labor market, which could present both opportunities and challenges for new businesses.