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ADP: Hiring rate in the US private sector unexpectedly declines in June

Private sector employment unexpectedly cooled in June, payroll processing company ADP said on Wednesday, marking the third consecutive month that job creation has declined.

The job gain was 150,000, below’s consensus estimate of 163,000 and below May’s revised figure of 157,000, the report said.

Policymakers are expecting a cooler labor market – along with lower inflation – as they consider the right time to begin cutting interest rates.

The current trend, if it continues, could fuel optimism that the first rate cuts could come sooner rather than later – after the Federal Reserve kept interest rates at their highest levels in more than two decades in recent months.

In addition to the ADP report, government figures released on Wednesday also showed that jobless claims rose to 238,000 in the week ending June 29.

Meanwhile, the four-week average of jobless claims rose to the highest level since late August, according to Pantheon Macroeconomics.

This week, markets will also be looking to the government’s latest jobs report, due on Friday, to gauge broader trends in the world’s largest economy.

Commenting on ADP’s figures, chief economist Nela Richardson said: “Job growth was solid but not broad-based.”

However, she added that without a recovery in hiring in the leisure and hospitality sectors, “June would have been a gloomy month.”

Most of the new jobs were created in the service sector. The strongest increase was in the leisure and hospitality sector (63,000).

In other sectors, such as professional and business services, 25,000 new jobs were created.

Across all goods-producing sectors, 14,000 new jobs were created. Losses in natural resources and mining and manufacturing were offset by increases in construction.

“The data point to continued positive private sector employment growth, which has remained stable so far this year,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics, in a note.

It expects continued positive employment growth and low unemployment, which “should support economic activity this year.”

Meanwhile, wage gains for workers who stayed in their jobs were 4.9 percent last month, the lowest growth rate since August 2021, according to ADP.

For employees who changed jobs, the salary increase decreased to 7.7 percent, the report said.

A healthy labor market would allow the Fed to be patient with cutting interest rates, said Oxford Economics. The central bank expects a first cut in September.


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