Hiring in the United States jumped in December with a boost from service industries, although salary growth slowed, payroll firm ADP said Thursday.
Private employment rose by 235,000 jobs last month, more than analysts expected, with job creation robust across small and medium establishments, according to an ADP survey.
Labor market strength has been a key area policymakers are eyeing as they battle to bring down surging inflation in the world’s biggest economy.
One area of concern is growing wages as companies competed to find and retain workers, with fears that this could spill into increasing costs for services and continue to support spending — making inflation more persistent.
“The labor market is strong but fragmented, with hiring varying sharply by industry and establishment size,” ADP chief economist Nela Richardson said in a statement.
In particular, firms that hired aggressively in the first half of last year eased their pace, and in some instances cut jobs in the final month of 2022, she added.
For now, the jobs growth figure seems to point to stronger-than-expected official employment numbers on Friday, said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Although the US central bank has moved to raise interest rates rapidly in the past year to cool the economy, making borrowing more expensive, the labor market has remained resilient.
But in December, workers saw the lowest pay growth since March 2022, according to ADP numbers, potentially bringing some relief to policymakers.
Employees’ annual pay gains eased to 7.3 percent in the recently revamped report which includes wage data.
“December ushered in the largest decline in pay growth for job stayers in the three-year series history,” ADP added.
For those who switched jobs, annual pay was still up 15.2 percent.
“We expect payrolls to remain positive for now. But the pace is expected to slow further as the (Federal Reserve) pushes rates into restrictive territory, to slow demand and economic activity,” said Rubeela Farooqi of High Frequency Economics.
In December, although smaller firms saw stronger employment gains, large establishments had a drop in employment of 151,000 jobs, ADP said.
Among sectors, leisure and hospitality saw big gains, although other areas like trade and transportation reported losses.
The data may offer a preview of the government employment report released Friday, although the ADP report does not always align with official figures.
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