ADP Employment Slows in August

Job creation continued to slow last month, according to the new ADP National Employment Report. Nonfarm private sector payrolls increased 132,000 (3.6% y/y) in August, down from a 268,000 increase in July. This was the weakest monthly reading since January 2021 and pointed to some softening in labor-market conditions. The Action Economics Forecast Survey had looked for a 288,000 increase. With this report, nonfarm private employment regained all the jobs lost during the pandemic with employment now 0.1% higher than in February 2020.

Today's release marked a complete revamping of the series by the ADP Research Institute in collaboration with the Stanford Digital Economy Lab. The report aggregates payroll data of more than 25 million US employees in an attempt to provide a representative picture of the US labor market. The data are only for the private nonfarm sector.

The August increase in employment was led by an 110,000 increase in jobs in service-producing industries. However, the gains were concentrated, only in Trade, transportation and utilities (+54,000) and in Leisure/hospitality (+96,000). All other major service sectors experienced job losses in August. Goods-producing industries added 23,000 jobs in August with a 21,000 gain in construction accounting for the lion's share of the increase.

The smallest firms (1-19 employees) continued to shed jobs with employment in that category falling 47,000 in August, the seventh monthly decline in the past eight months. Employment at firms with 20-49 employees increased 72,000 in August versus 53,000 in July. Employment at medium-sized firms (50-499 employees) slowed markedly in August with an increase of only 53,000, down from 157,000 in July and the smallest rise since a 78,000 decline in December 2020. Employment at large firms (500+ employees) rose 54,000 in August versus an 111,000 gain in July.

The new report also contained employment by Census region. Employment in the Northeast rose 23,000 in August following a 30,000 gain in July. A 19,000 increase in employment in the Middle Atlantic accounted for most of the increase. Employment in the Midwest fell 7,000 in August, its second consecutive monthly decline. Employment in the South was the largest gainer of the four major regions with an August increase of 76,000. However, this was the weakest gain since January 2021. Jobs in the West increased 40,000 with almost all of the increase in the Mountain region (+37,000).

Another new feature of this report is the inclusion of salary data. Median annual pay is reported monthly with breakdowns by worker type, gender, age, industry and firm size. The annual rate of increase in pay for "job stayers" was 7.6% y/y in August, the same as in July. The pace of pay gains has flattened recently but the current pace stands in stark contrast to less than 2% annual gains witnessed in early 2021. Gains have been fastest in the 16-24 year ago group, in the leisure/hospitality industry and from larger firms (500+ employees).

The ADP National Employment Report and Pay Insights data can be found in Haver's USECON database. Historical figures date back to January 2010 for private employment. Pay data date back to October 2020. The expectation figure is available in Haver's AS1REPNA database.