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Thursday, September 28, 2023

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Preliminary August Job Report Points Toward Strong Economy

The United States fell short of the expected jobs experts anticipated were added jobs, a sign that the U.S. economy may finally be easing under the pressure of the federal interest rate increase. 

ADP reported on Aug. 30 that private employers added 177,000 new jobs to the market in August compared to the 187,000 jobs that were added the month prior.

Dow Jones spoke with expert economists who stated the 177,000 jobs is much lower than what they anticipated.

Economists and market experts say they were expecting 200,000 August jobs to be added in August.

In addition to August jobs added, ADP also reported that pay growth also saw a decline for workers who changed jobs and workers who stayed in the same position.

“This month’s numbers are consistent with the pace of job creation before the pandemic,” Nela Richardson, chief economist at ADP, said in a press release. “After two years of exceptional gains tied to the recovery, we’re moving toward more sustainable growth in pay and employment as the economic effects of the pandemic recede.”

The unfortunate findings of the reports caused investors and economists to decide on whether inflation in the United States can continue to drop down to 2% without a severe hit to the U.S. economy. Currently, both parties are split. 

Labor market strength has been a key reason the economy has grown faster than many expected in 2023.

The Federal Reserve hiked rates to the highest in 22 years in July and Fed Chair Jerome Powell signaled last week that the central bank was prepared to increase federal interest rates even further later this year.

Typically, the ADP report has been seen as insight to what the Department of Labor report will show in terms of the creation of jobs on a monthly basis.

It’s important to note, ADP did change its method of testing last year, which makes this prediction less clear and in turn, less accurate. 

Different sectors of work saw different levels of job increases.

  • Trade/transportation/utilities jobs increased by 45,000
  • Information increased by 5,000
  • Financial activities did not increase or decrease
  • Professional/business services increased by 15,000
  • Education/health services by 52,000
  • Leisure/hospitality increased by 30,000
  • Other 7,000

In terms of establishment size, large establishments, a business with 500 or more employees increased by 83,000 with medium and small increasing by 59,000 and 18,000 respectively.

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