New data from ADP released on Thursday showed the private sector added the fewest monthly jobs since January 2021, signaling a slowing labor market.
The ADP National Employment Report for August showed an addition of 99,000 jobs, well below economists' estimates of 145,000 jobs, and slightly more than the 122,000 jobs added in July. The August data marked the fifth consecutive month in which job additions slowed compared to the previous month.
"The slowdown in the job market led to slower-than-usual hiring after two years of exceptional growth," ADP chief economist Nela Richardson said in the statement. "The next indicator to watch is wage growth, which is now stabilizing after a dramatic post-pandemic decline."
The data comes as investors watch for signs of how quickly the Federal Reserve may cut interest rates as inflation eases. The slowdown in the job market is now the main factor being considered.
In a speech in late August, Federal Reserve Chairman Jerome Powell said that the cooling in the job market was "clear." Powell added that downside risks to the central bank's mandate for full employment have increased.
More signs of a slowing labor market can be seen in data released Wednesday by the Bureau of Labor Statistics. The Job Openings and Job Exit Survey (JOLTS) showed there were 7.67 million jobs offered at the end of July, down from the 7.91 million seen in June. This marks the lowest number of open jobs since January 2021.
Also in the report, the ratio of unemployed workers to open jobs fell to 1.07 in July, below the average seen in 2019 before the pandemic disrupted the labor market and almost in line with data from April 2018.
Renaissance Macro's head of economic research, Neil Dutta, wrote in X that the decline in the ratio was "another sign that labor demand has fallen, slightly above pre-pandemic levels."
A more comprehensive picture of the labor market will be released on Friday with the August jobs report.
Consensus expectations among economists polled by Bloomberg expected the US economy to add 165,000 jobs in August while the unemployment rate fell to 4.2%. This would mark the first drop in the unemployment rate since March.
