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Private sector payrolls only increased by 132,000 in August

A hiring sign is seen at a cafe as the U.S. Department of Labor released its July jobs report, in Manhattan, New York, August 5, 2022.

andrew kelly | Reuters

Businesses sharply slowed the pace of hiring in August amid growing fears of an economic slowdown, according to payroll processing firm ADP.

Private payrolls rose just 132,000 for the month, a deceleration from July’s gain of 268,000, the company said in its monthly payroll report.

The Dow Jones estimate for the number of ADPs was 300,000.

“Our data suggests a shift toward a more conservative pace of hiring, perhaps as companies try to decipher the mixed signals from the economy,” said ADP Chief Economist Nela Richardson. “We could be at an inflection point, from superpowered job gains to something more normal.”

The August payroll numbers are notoriously volatile. The ADP release also comes at an uncertain time for a US economy that experienced negative growth in the first half of 2022 amid the highest inflation the country has seen since the early 1980s. The Bureau of Labor Statistics’ most closely watched nonfarm payrolls is released Friday and is expected to show an increase of 318,000.

The ADP report had been put on hiatus for the latter part of the summer as the company adjusted its methodology and entered into a partnership with the Stanford Digital Economy Lab.

While most of the changes are technical in nature, ADP’s tally differs in how it takes into account issues such as weather and natural disasters. The company also differs from the BLS in that ADP’s tally includes all active employees in the company, while the BLS measures only those who were paid that month.

Richardson told members of the media that the revised approach “captures a new evolution in how we view data at ADP. This is an independent estimate of private sector employment that leverages the full scale and breadth of ADP’s microdata based on the clients we work with every single day.”

In addition to changes to how total jobs are counted, ADP now provides salary information. The August figures add to inflation concerns as the company announced a 7.6% increase in annual wages for the month.

From a sectoral perspective, service-related industries accounted for most jobs, with an additional 110,000 jobs. Leisure and hospitality increased by 96,000 while recording wage increases of 12.1%. Trade, transport and public services contributed 54,000.

However, several sectors experienced declines. They included financial activities (-20,000), education and health services (-15,000) and professional and business services (-14,000).

On the goods production side, construction added 21,000 and natural resources and mining gained 2,000. Manufacturing was flat.

From a business size perspective, businesses with 500 or more employees increased by 54,000. Mid-sized businesses added 53,000, while those with less than 50 employees saw a gain of 25,000. .

Correction: The US economy experienced negative growth in the first half of 2022. An earlier version misrepresented the year.

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