American businesses hired fewer workers in January but that might not be a sign of a softening of the labor market.
The ADP National Employment Report showed on Wednesday that payrolls at private-sector businesses rose by just 106,000, far below the prior month’s figure and missing estimates for 190,000.
The prior month was revised up to 253,000 from 235,000, indicating that the labor market was even hotter than thought at the close of 2022.
The Federal Reserve has been attempting to cool off demand for labor, fearful that the imbalance between supply and demand for workers will fuel further inflation. The slowdown in January may not provide much comfort, however, because ADP attributed it to weather-related disruptions rather than an easing of demand for workers.
“Employment was soft during our Jan. 12 reference week as the U.S. was hit with extreme weather. California was coping with record floods and back-to-back storms delivered ice and snow to the central and eastern U.S.,” ADP said.
“Hiring was stronger during other weeks of the month, in line with the strength we saw late last year,” ADP economist Nela Richardson said.
The ADP private sector jobs report is based on aggregated payroll data of more than 25 million U.S. workers. It no longer attempts to predict the government’s official payroll data, which is usually released on the first Friday of every month. It is now considered an independent measure of the labor market.
The goods producing sector shed 3,000 jobs, according to ADP. Manufacturing added 23,000 workers while construction employment shrank by 24,000 and natural resource extraction and mining shrank by 1,000.
Services payrolls grew by 109,000. The leisure and hospitality sector added 95,000 jobs and financial services added 30,0000. Despite headlines about layoffs in the tech sector, payrolls grew by 5,000 in information services. Trade, transportation, and utilities shrank by 41,000.