Hiring by U.S. companies unexpectedly cooled in November, the latest sign that the labor market is softening in the face of higher interest rates, according to the ADP National Employment Report released Wednesday morning.
Companies added 103,000 jobs last month, below the 130,000 gain that economists surveyed by Refinitiv predicted and slightly lower than the revised 106,000 increase recorded in October.
The weaker-than-expected report comes in the wake of an aggressive tightening campaign by the Federal Reserve, which has hiked rates to the highest level since 2001. Fed officials, including Chair Jerome Powell, have opened the door to at least one more hike this year — and have signaled that rates will remain elevated for longer as they assess whether high inflation has retreated for good.
In a potentially welcoming sign for the Fed as it tries to wrangle inflation under control, wage growth continued to slow in November.
Annual pay rose 5.6% last month, the 14th straight month of slowing growth, according to the report. It marked the lowest level of pay growth since September 2021. For workers who switched jobs, wages climbed 8.3%, down from 8.4% the previous month.
The trade, transportation and utilities industries drove the biggest job gains last month, adding 55,000 new employees. But there were also notable gains in other sectors, including education and health services, financial activities and information.
The gains helped to offset losses in manufacturing, leisure and hospitality, and professional and business services.
"Restaurants and hotels were the biggest job creators during the post-pandemic recovery," said Nela Richardson, chief economist at ADP. "But that boost is behind us, and the return to trend in leisure and hospitality suggests the economy as a whole will see more moderate hiring and wage growth in 2024."
The data precedes the release of the more closely watched November jobs report from the Labor Department on Friday morning, which is expected to show that employers hired 180,000 workers, following a gain of 150,000 in October. The unemployment rate is expected to hold steady at 3.9%.
ADP numbers can differ drastically from the official government count and have historically been an unreliable indicator of what's to come.