ADP Report: Job Growth Fell Short in January; Wage Growth Slowed

Industry and Sector Analysis

The goods-producing sector contributed 30,000 jobs, with construction (22,000 jobs) leading the growth. Manufacturing and natural resources/mining added a modest 2,000 and 6,000 jobs, respectively. The service-providing sector saw a higher increase, adding 77,000 jobs, with leisure/hospitality (28,000 jobs) and trade/transportation/utilities (23,000 jobs) being significant contributors. However, the information sector experienced a decline, losing 9,000 jobs.

Regional Job Distribution

Job growth was uneven across U.S. regions. The South led with 57,000 new jobs, followed by the Northeast with 32,000 and the Midwest with 24,000. The West showed minimal change, adding only 2,000 jobs. This regional disparity highlights the varied economic recovery and growth rates across the country.

Wage Growth Insights

Despite the slowdown in job growth, annual pay for job-stayers increased by 5.2 percent in January, a slight decrease from December’s 5.4 percent. Job-changers experienced a 7.2 percent increase in pay, the smallest annual gain since May 2021. This wage growth trend is critical in understanding the labor market’s dynamics, especially in the context of inflation and cost-of-living adjustments.

Establishment Size Impact

The report also sheds light on job changes by establishment size. Small establishments (1-49 employees) added 25,000 jobs, medium establishments (50-499 employees) contributed 61,000 jobs, and large establishments (500+ employees) accounted for 31,000 jobs. This distribution underscores the varying capacities of different-sized businesses to navigate the current economic environment.

What Does It Indicate?

The labor market’s tempered growth, with a 107,000 job increase compared to the expected 148,000, suggests a cautious economic outlook. Coupled with a 5.2% wage increase for job-stayers, these factors may influence the Federal Reserve’s upcoming monetary policy decisions.

The market’s focus is now on the forthcoming Non-Farm Payrolls report, which will provide further insights into employment trends and wage growth. This report will be pivotal in shaping economic forecasts and guiding monetary policy in the near term, as it offers a more comprehensive view of the labor market, including government and non-profit sector jobs.