Job creation in the United States slowed more than expected in August, according to ADP, a sign that the surprisingly resilient U.S. economy might be starting to ease under pressure from higher interest rates.
The firm reported Wednesday that private employers added 177,000 jobs in August, well below the revised total of 371,000 added in July. Economists surveyed by Dow Jones were expecting 200,000 jobs added in August.
ADP also reported that pay growth slowed for workers who changed jobs and those who stayed in their current positions.
“This month’s numbers are consistent with the pace of job creation before the pandemic,” Nela Richardson, chief economist at ADP, said in a press release. “After two years of exceptional gains tied to the recovery, we’re moving toward more sustainable growth in pay and employment as the economic effects of the pandemic recede.”
The weaker-than-expected report comes as investors and economists are split on whether inflation in the United States can continue to trend down to 2% without a significant slowdown in the economy. Labor market strength has been a key reason the economy has grown faster than many expected in 2023.
The Federal Reserve hiked rates to the highest in 22 years in July and Fed Chair Jerome Powell signaled last week that the central bank was prepared to raise further this year.
The ADP report has traditionally been seen as a signal of what the Department of Labor’s monthly jobs report will show. However, the firm did change its methodology last year, which makes its predictive tendencies less clear.
The Department of Labor’s jobs report is due out Friday.