ADP Jobs Report Reveals April Hiring Spree, But Pay Growth Slows
Key takeaways
- Private payrolls hit 296,000 in April, over double expectations
- Wage growth dropped to 6.7% annually, down from 6.9% in March
- A combination of robust jobs market and lower wage growth could be good news for the Fed in avoiding a recession
The ADP jobs report has revealed a much stronger-than-expected payroll figure for April. As unemployment remains near a record low, the silver lining was that wage growth slowed to 6.7% for the month.
The jobs market continues to defy expectations, but the combination of a tight labor market and decreasing wage expectations could be the key to keeping the US economy away from a recession. We’ve got the latest below.
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What did the report say?
Private payrolls rose by 296,000 for April, vastly surpassing the estimated 133,000 figure from Dow Jones. Most of the jobs comprised leisure and hospitality sector positions, followed by health services and construction.
So, the jobs have been plentiful in recent weeks. But not every sector saw a gain: manufacturing jobs declined by 38,000 while the financial sector, beleaguered by three bank closures, dropped 28,000 jobs.
This is a problem for the economy that’s dealing with high inflation, as a strong labor market usually dictates higher wages which add inflationary pressures. But annual pay rose 6.7% in the last 12 months, dropping from 6.9% in March and 7.2% in February.
This could be the sweet spot that’s needed to help tame the economy and avoid a recession at the same time.
What does it mean?
The data suggests to investors that the Fed could stop its rate-rising crusade and hold interest rates steady, instead of opting for more hikes. But further investigation is needed, so Friday’s non-farm payrolls count data will give more of a hint at what’s going on with the jobs market.
A stronger-than-expected job market paired with slowing pay growth might lessen the chance of a recession. Fed chair Jerome Powell said as much in his press conference after the Fed confirmed a quarter-point interest rate hike for May, saying employment holding steady could mean mass layoffs won’t be needed across the country.
The bottom line
Inflation is sticky, a recession might be on the way and the jobs market isn’t making much sense right now. But we know that the Fed has a more positive outlook than before on the state of the economy, which could help more people keep their jobs. A win-win if you ask us.
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