In a surprising turn of events, the job market continued to defy expectations in June as private companies added 497,000 employees, more than double the projected number, according to ADP, a private payroll firm.The significant growth in June was primarily driven by the service sector, following the strong performance of 278,000 jobs added in May. The leisure and hospitality industry experienced the highest gains with an increase of 232,000 jobs.
Other sectors, such as trade and transportation, as well as education and health services, also showed robust job growth. However, there were declines in manufacturing, information, and finance.
Nela Richardson, Chief Economist at ADP, noted, “Consumer-facing service industries had a strong June, contributing to higher-than-expected job creation. However, wage growth in these industries continues to slow down, and hiring may be reaching its peak after a late-cycle surge.”
Among businesses with fewer than 50 employees, the most jobs were added, with a total of 299,000 gains. Meanwhile, wages saw an annual growth rate of 6.4%, slightly down from the previous month’s 6.6%.
Additionally, the Labor Department reported 9.8 million job openings at the end of May, a slight decrease from April’s 10.1 million. The health care and social assistance sector saw the largest decrease in job openings, followed by finance and insurance, and other services. On the other hand, job openings increased in educational services, state and local government education, and the federal government.
The ADP report precedes the government’s release of the June jobs report, with analysts expecting an increase of 225,000 jobs, following May’s figure of 339,000. The resilient labor market has been a notable feature of the economy in 2023, defying predictions of an impending recession that has been pushed to the following year.
However, certain industries, including information technology, finance, manufacturing, and online media, have seen an increase in layoffs.
The Federal Reserve is closely monitoring the labor market for signs of weakening, as it could help alleviate inflation that still remains significantly above the central bank’s target. While wages have been rising, the pace has slowed compared to a year ago, and there is little evidence of a wage-price spiral.
In the minutes released from the Fed’s June meeting, policymakers expressed uncertainty about the impact of the central bank’s 16-month period of higher interest rates. Although inflation has moderated somewhat, it still exceeds the Fed’s annual goal of 2%, while the economy continues to grow at a rate just below 2% annually.
Sevin Yeltekin, the dean of the William E. Simon Business School at the University of Rochester, stated, “People have this perception that we’re experiencing a major economic meltdown, but that’s not the case.” Yeltekin emphasized the resilience of the economy, which has performed better than expected following the economic shock of the coronavirus pandemic in 2020.
