Small Nonfarm Payrolls "Surprise"! US August ADP Employment Increases by Only 38,000, Setting a New Low for the Year

According to Jinzhong Finance APP, data released by the ADP Research Institute on Wednesday shows that U.S. private sector employment, often called the "mini nonfarm payroll," grew moderately in August. Private employment increased by 38,000 last month, while July's figure was revised up to 46,000. Economists polled by the market had previously expected private employment to rise by 48,000 in August, following an initially reported increase of 44,000 in July. The data indicates that employers are still hiring, but at a slower pace compared to the spring. August's employment gain was the smallest increase so far this year.

The ADP report is jointly compiled by ADP and the Stanford Digital Economy Lab and is published ahead of the more comprehensive and widely watched August nonfarm employment report from the Bureau of Labor Statistics (BLS), which will be released on Friday. Historically, ADP data has offered limited reference value for estimating BLS private employment figures.

By industry, education and health services led the gains, followed by leisure and hospitality, as well as construction, while manufacturing jobs shrank. ADP data shows that most new jobs came from large enterprises with 500 or more employees.

From a broader perspective, job growth this year has been uneven, though another government report shows the unemployment rate remains at a historic low. This situation has reassured certain Federal Reserve officials — the labor market is roughly balanced, allowing more attention to be focused on inflation.

Federal Reserve Chair Kevin Walsh admitted last week that there are some "areas of concern" but overall said the labor market meets the conditions for full employment.

"When the growth of the labor supply is almost stagnant, the average monthly job growth naturally settles at a lower level," Walsh said during a speech at the Federal Reserve's annual symposium in Wyoming. "But in general, people who want to work can basically find or keep a job."

Stricter immigration policies, declining birth rates, and an aging population are among the multiple factors jointly constraining the growth rate of the U.S. labor force.

Wage Growth

The data also shows that total compensation for job changers rose 7.3% year-on-year, a growth rate that slowed compared to the previous month. For those staying in their jobs, total compensation increased by 4.4% year-on-year, remaining steady from the previous month. ADP also calculated base salary data (excluding bonuses, commissions, and tips), which showed a similar trend to total compensation.

Currently, ADP provides employee wage data covering 56 major metropolitan areas across the U.S., with the ability to break it down by demographic characteristics, industry, and company size.

The U.S. Department of Labor will release a more comprehensive August employment report on Friday (including public sector hiring). The market expects total nonfarm employment to increase by 55,000 in August, rebounding from the unexpectedly weak showing in July, which saw a decrease of 23,000.

Data released by the Bureau of Labor Statistics on Tuesday showed that in July, there were 1.05 job openings for every unemployed person in the U.S., basically unchanged from June, indicating that conditions in the labor market remained stable.