Private employers added 103,000 jobs in November in another sign that the labofr market is returning to a more normal pace, payroll firm ADP said Wednesday.
The figure compares with the revised 106,000 added in October and forecasts for an increase of 130,000.
The gains came primarily in the services sector, where 117,000 jobs were added, about half of them in the trade, transportation and utilities industries. Leisure and hospitality, a key driver of job growth for much of last year, shed 7,000 jobs. Medium-sized companies, those with between 50 and 249 employees, were responsible for 71,000 new jobs.
Meanwhile, average wages rose at an annual rate of 5.6%, the slowest pace since September 2021, although well above the current level of inflation.
“Restaurants and hotels were the biggest job creators during the post-pandemic recovery,” said Nela Richardson, chief economist at ADP. “But that momentum is behind us, and the return to trend in leisure and hospitality suggests the economy as a whole will see more moderate hiring and wage growth in 2024.”
The ADP report follows Tuesday’s release of the Labor Department’s October vacancy figure that showed a marked slowdown, down to 8.7 million from a downwardly revised figure of 9.35 million in September. However, hiring and layoff levels remained stable, suggesting the decline was due to employers cutting their estimates of potential hiring.
Still, the outlook is one of a labor market returning to a more normal balance between supply and demand.
“Overall, we’ve seen the lowest job openings in some time, but there are still more jobs than job seekers,” says Haley Damm, head of workforce planning at Adecco US. “It has been softening and cooling slightly in recent months.”
Balance in the labor market is a critical factor that the Federal Reserve is looking for as it attempts to squeeze inflation out of the economy. That effort is working, but the inflation rate is still above the 2% annual target set by the Federal Reserve. The central bank will meet next week to consider the level of interest rates, but most analysts believe it will keep them unchanged for now, as it has already raised rates for the current cycle.
“The labor market is gradually relaxing and softening,” says Julia Pollak, chief economist at ZipRecruiter. As for the Fed, she adds: “I still think we have a couple of months left to remain stable, but I think we could see rate cuts as early as March.”
That still leaves open debate among economists about whether the economy will suffer a recession next year.
“It’s a bit of a confusing time,” says Sevin Yeltekin, dean of the Simon Business School at the University of Rochester.
This is because economic data continues to show both weakness and strength depending on the sector of the economy and whether it looks backward or forward. “Maybe I’m a little optimistic,” Yeltekin adds.
On the inflation front, the cost of energy – a key component of the overall price picture – continues to retreat from levels from earlier this year. Gasoline prices fell another four cents this week to a national average of $3.21, the 11th consecutive week of decline. Meanwhile, oil is trading at $72 a barrel for West Texas crude.
The 10-year Treasury yield has fallen to 4.2% from nearly 5% in mid-October.