ADP Reports Unexpectedly High Private Payroll Growth of 235,000 in December

The jobs market ended the year on a strong note, with companies adding far more jobs than expected in December, according to payroll processing firm ADP. This positive news indicates that the job market is continuing to improve and that businesses are confident in the economy.

Private payrolls rose by 235,000 in December, well ahead of the 153,000 estimate from Dow Jones and the 127,000 initially reported for November. This is a positive sign for the economy, as more businesses are hiring and expanding their workforce.

The goods-producing sector increased by 22,000, while service providers added 213,000. Leisure and hospitality led the way with 123,000 new positions, followed by professional and business services with 52,000, and education and health services with 42,000.

After the release of a strong jobs report, stock market futures edged lower as investors feared that the Federal Reserve would keep raising interest rates.

Despite the Federal Reserve's attempts to slow down the job market, there has been a big surprise in job growth. This has helped push inflation to near its highest level in over 40 years.

The central bank raised interest rates seven times in 2022, totaling 4.25 percentage points. Officials have identified labor market imbalances as a pivotal area they want to target. There are still about 1.7 job openings for every available worker, a condition that has led to a spike in wages. However, wages have not kept pace with cost of living increases.

According to ADP, annual pay across all categories rose 7.3% from a year ago, with the leisure and hospitality industry seeing the biggest increase at 10.1%.

"The labor market is strong but fragmented, with hiring varying sharply by industry and establishment size," ADP chief economist Nela Richardson said. "Business segments that hired aggressively in the first half of the year have slowed hiring and in some cases cut jobs in the last month of the year."

There was a 24,000 job loss in trade, transportation and utilities, while natural resources and mining declined by 14,000 and financial activities dropped by 12,000. Other notable gainers by sector included professional and business services (52,000), education and health services (42,000) and construction (41,000).

Small- and medium-sized businesses added a combined 386,000 workers in the latest jobs report, while companies with more than 500 employees saw a drop of 151,000.

The job gains come after a year of strong payroll growth, averaging nearly 300,000 jobs per month, according to ADP data. This is a substantial increase from the Labor Department's official nonfarm payrolls count.

Despite an economy that saw negative growth in the first two quarters, central banker policymakers said they plan to continue raising rates and don’t anticipate any reductions at least through 2023.

The ADP report comes out one day before the Labor Department’s official count. The ADP report is expected to show growth of 200,000 in nonfarm jobs, with the unemployment rate staying steady at 3.7%. However, the November nonfarm payrolls report showed much greater growth than the ADP total, with 263,000 new jobs.