ADP National Employment Report: Private Sector Employment Increased by 107,000 Jobs in January; Annual Pay was Up 5.2%
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Insights
The ADP National Employment Report indicating a 107,000 job increase in January and a 5.2 percent annual pay rise suggests a nuanced narrative in the labor market. While employment growth continues, the pace is slower compared to previous periods. This deceleration may reflect a maturing economic expansion where job gains naturally taper as the market approaches full employment. However, the slowing wage growth could be a double-edged sword. On one hand, it may signal an easing of inflationary pressures, which could in turn affect monetary policy decisions by central banks. On the other hand, if wage growth lags behind inflation, real incomes could decline, potentially dampening consumer spending and economic growth.
Furthermore, the data on job-switcher pay premiums reaching new lows is indicative of a cooling labor market. This could be beneficial for businesses facing high labor costs, but it may also lead to decreased mobility and dynamism in the job market. The regional and sectoral breakdown of job changes provides a deeper understanding of the economic landscape, revealing which areas are experiencing growth and which are lagging. Such granularity helps policymakers and businesses tailor their strategies to regional and sector-specific conditions.
The granularity of the ADP report, with its breakdown by industry, region and establishment size, offers valuable insights for market analysts. For instance, the construction and leisure/hospitality sectors showed notable job gains, which could indicate underlying strength in these areas. Investors might look at companies within these sectors for potential growth opportunities. Conversely, the information sector's job decline may raise concerns about the health of this industry. Analyzing the pay gains for job-stayers and job-changers can also inform investment decisions, as it reflects the bargaining power of labor and could impact consumer demand and corporate profit margins.
Additionally, the report's annual revisions and technical updates, such as re-weighting of data, are crucial for ensuring accuracy and reliability. These revisions can lead to a reassessment of past economic conditions and may influence future projections. As a result, investors and businesses must stay informed about these updates to make data-driven decisions.
From a financial perspective, the reported 5.2 percent wage growth for job-stayers, although moderating, is still significant and could have implications for corporate earnings. Companies may face increased costs due to higher wages, which could squeeze profit margins unless offset by productivity gains or passed on to consumers through higher prices. The pay disparity between job-stayers and job-changers, with job-changers experiencing a 7.2 percent increase, suggests a competitive market for talent, though the narrowing of this gap may indicate a shift towards a more balanced labor market.
The report's impact on the stock market can be multifaceted. On one hand, signs of a stable labor market and controlled wage inflation may reassure investors about the sustainability of the current economic environment. On the other hand, any indication of a slowdown in job creation could fuel concerns about a potential economic downturn. Investors will need to weigh these factors alongside other economic indicators to form a comprehensive outlook on market conditions.
The jobs report and pay insights use ADP's fine-grained anonymized and aggregated payroll data to provide a representative picture of the private-sector labor market. The report details the current month's total private employment change, and weekly job data from the previous month. Because the underlying ADP payroll databases are continuously updated, the report provides a high-frequency, near real-time measure of
"Progress on inflation has brightened the economic picture despite a slowdown in hiring and pay," said Nela Richardson, chief economist, ADP. "Wages adjusted for inflation have improved over the past six months, and the economy looks like it's headed toward a soft landing in the
January 2024 Report Highlights*
View the ADP National Employment Report and interactive charts at www.adpemploymentreport.com.
Jobs Report
Private employers added 107,000 jobs in January
The hiring slowdown of 2023 spilled into January, and pressure on wages continues to ease. The pay premium for job-switchers shrank to a new low last month.
Change in
Change by Industry Sector
- Goods-producing: 30,000
- Natural resources/mining 6,000
- Construction 22,000
- Manufacturing 2,000
- Service-providing: 77,000
- Trade/transportation/utilities 23,000
- Information -9,000
- Financial activities 7,000
- Professional/business services 2,000
- Education/health services 17,000
- Leisure/hospitality 28,000
- Other services 9,000
Change by
- Northeast: 32,000
- New England 5,000
- Middle Atlantic 27,000
- Midwest: 24,000
- East North Central 17,000
- West North Central 7,000
- South: 57,000
- South Atlantic 39,000
- East South Central -1,000
- West South Central 19,000
- West: 2,000
- Mountain 2,000
- Pacific 0
Change by Establishment Size
- Small establishments: 25,000
- 1-19 employees 19,000
- 20-49 employees 6,000
- Medium establishments: 61,000
- 50-249 employees 53,000
- 250-499 employees 8,000
- Large establishments: 31,000
- 500+ employees 31,000
Pay Insights
Pay gains continued to shrink in January
Year-over-year pay gains for job-stayers reached 5.2 percent in January, down from 5.4 percent in December. For job-changers, pay was up 7.2 percent, the smallest annual gain since May 2021.
Median Change in Annual Pay (ADP matched person sample)
- Job-Stayers
- Job-Changers 7.
Median Change in Annual Pay for Job-Stayers by Industry Sector
- Goods-producing:
- Natural resources/mining
4.7% - Construction
5.6% - Manufacturing
4.8%
- Service-providing:
- Trade/transportation/utilities
4.7% - Information
4.5% - Financial activities
5.6% - Professional/business services
5.1% - Education/health services
5.9% - Leisure/hospitality
6.3% - Other services
5.5%
Median Change in Annual Pay for Job-Stayers by Firm Size
- Small firms:
- 1-19 employees
4.5% - 20-49 employees
5.4%
- Medium firms:
- 50-249 employees
5.5% - 250-499 employees
5.4%
- Large firms:
- 500+ employees
5.1%
To see Pay Insights by
* Sum of components may not equal total, due to rounding.
The December total of jobs added was revised from 164,000 to 158,000. The historical data file, and weekly data for the previous month, is available at https://adpemploymentreport.com/.
January's report presents the scheduled annual revision of the ADP National Employment Report, which updates the data series to be consistent with the annual Quarterly Census of Employment and Wages (QCEW) benchmark data for March 2023. In addition, this revision introduces technical updates, namely, in re-weighting of ADP data to match QCEW data. The historical file was updated to reflect these revisions.
To subscribe to monthly email alerts or obtain additional information about the ADP National Employment Report, including employment and pay data, interactive charts, methodology, and a calendar of release dates, please visit https://adpemploymentreport.com/.
The February 2024 ADP National Employment Report will be released at 8:15 a.m. ET on March 6, 2024.
About the ADP® National Employment Report™
The ADP National Employment Report is an independent measure of the change in
The ADP National Employment Report is broadly distributed to the public each month, free of charge, as part of the company's commitment to offering deeper insights of the
About the ADP Research Institute®
The ADP Research Institute delivers data-driven discoveries about the world of work and derives reliable economic indicators from these insights. We offer these findings as a unique contribution to making the world of work better and more productive by delivering actionable insights to the economy at large.
About ADP (NASDAQ – ADP)
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SOURCE ADP, Inc.
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