ADP Reports Slower Private Payroll Growth in July, Wage Increases Hit Three-Year Low

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SUNRISE, FL — Private sector employment growth decelerated in July, with wage increases reaching a three-year low, according to a report released by payroll processing firm ADP on Wednesday.

Employment Numbers

The private sector added only 122,000 jobs in July, marking the slowest growth since January and falling short of June’s revised figure of 155,000. This was also below the 150,000 job gains anticipated by economists surveyed by Dow Jones.

Wage Growth Trends

ADP also revealed that wages for those who remained employed rose by 4.8% year-over-year, the lowest increase since July 2021 and a slight decline from June’s 4.9%.

“With wage growth falling, the labor market is accommodating the Federal Reserve’s effort to slow inflation,” commented ADP Chief Economist Nela Richardson. “If inflation starts to rise again, it won’t be because of labor.”

Market Reactions

Following the report, futures tied to major stock indexes saw gains, while Treasury yields decreased.

Additional Economic Indicators

In related news, the Labor Department’s Bureau of Labor Statistics reported that the labor cost index, a key measure for Fed officials, rose by just 0.9% in the second quarter. This was lower than both the 1.2% increase in the first quarter and the 1% gain expected by Dow Jones.

These reports could potentially influence the Federal Reserve’s decision to signal a rate cut in its upcoming September meeting.

Sector-Specific Job Growth

Job growth in July was predominantly seen in trade, transportation, and utilities with 61,000 new jobs, and construction with 39,000. Other sectors experiencing growth included:

  • Leisure and Hospitality: +24,000 jobs
  • Education and Health Services: +22,000 jobs
  • Other Services: +19,000 jobs

Conversely, several sectors reported job losses:

  • Professional and Business Services: -37,000 jobs
  • Information: -18,000 jobs
  • Manufacturing: -4,000 jobs

Small businesses with fewer than 50 employees also saw a decline, losing 7,000 jobs in July.

Regional Employment

Geographically, job growth was most concentrated in the South, which added 55,000 new jobs, while the Midwest saw an increase of only 17,000 jobs.

Upcoming Labor Statistics

This ADP report precedes the Labor Department’s Bureau of Labor Statistics release of the nonfarm payroll numbers, which includes government jobs and can often differ from the ADP report. In June, ADP’s figures exceeded the BLS estimate of 136,000 for private payrolls.

Economists predict that employment will increase by 185,000 in July, down from 206,000 in June, with the unemployment rate expected to remain steady at 4.1%.

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