Private payrolls came in well shy of expectations in January amid broader strength in the labor market, new data shows.
The number of workers added to company payrolls increased by 107,000 in January, below the median forecast of around 150,000, according to the ADP National Employment Report published Wednesday. December jobs numbers were also revised down to 158,000 from 164,000.
Goods-producing sectors added 30,000 jobs and the service sector added 77,000, with the bulk of those in hospitality and transportation.
The tight labor market, which has remained below 4 percent unemployment for the past two years, appears to be providing workers the power to change jobs and increase their pay. However, the most recent report said the gap in pay hikes for people who change jobs versus those who stay in their jobs has shrunk.
Pay is up 7.2 percent annually for people who change employers, while it is up just 5.2 percent annually for people who do not change jobs.
People staying in leisure and hospitality jobs, which are typically some of the lowest paid in the economy, saw a 6.3-percent annual pay increase in January, the largest rise of any single sector. That’s consistent with a broader trend in the post-pandemic economy, in which wage growth has outpaced inflation for the lowest-paid workers.
The numbers come ahead of the Friday jobs report by the Labor Department, which provides a more comprehensive look at national employment conditions. The ADP survey has often failed to line up with the Labor Department’s measurements over the past year.
Unemployment stands now at 3.7 percent, with the economy having added 216,000 jobs in December. Job openings spiked in December to a three-month high above 9 million, though they’ve been generally decreasing over the past year and a half. The rate at which people are quitting their jobs is at the lowest point in more than three years.
Employment levels have remained high despite numerous rate hikes by the Federal Reserve meant to slow the economy.
“Fed rate hikes have not visibly slowed consumer credit growth, or increased unemployment (fortunately),” UBS economist Paul Donovan wrote in a Wednesday commentary. “US inflation slowed from 8.1% year-over-year to 3.4% year-over-year because it was naturally going to slow.”
The Federal Reserve’s interest rate-setting committee meets this week, and markets widely expect rates to be held steady at their current, two-decade-high level of 5.25 percent to 5.5 percent.