US Economy Exceeds Expectations with Major Job Boost in June
The US economy exceeded expectations with a significant boost in job creation in June according to the ADP Employment Report. Approximately 497,000 jobs were added— more than twice the anticipated 225,000, marking the largest monthly increase since February 2022.
The increase in job creation was led by the consumer-facing services sector, including the leisure and hospitality industry, the trade and transportation sector, as well as education and health services. These areas showed robust gains, even though the employment market remained uneven. Some sectors such as manufacturing, information, and finance experienced declines.
However, the ADP report’s accuracy should be viewed with a grain of salt. The organization has historically under-estimated official BLS data for nine of the previous 11 months, and 14 out of the last 17 months. “Consumer-facing service industries had a strong June, aligning to push job creation higher than expected,” said ADP chief economist Nela Richardson. Despite this, she also highlighted that wage growth in these sectors is diminishing, and that the recent surge in hiring may be nearing its peak.
The report indicated slowing wage growth, which can be seen as a positive trend for Jerome Powell at the Federal Reserve. For employees who stayed in their current positions, the year-over-year wage increase was 6.4% in June, a decrease from 6.6% in May. Those who changed jobs saw their wages increase at the slowest pace since October 2021, marking the 12th consecutive month of deceleration, with gains slowing to 11.2%.
The report suggested that this slowing wage growth shouldn’t come as a surprise, considering that most of the job growth has been in lower-paying sectors like leisure and hospitality, and trade and utilities. In contrast, sectors that typically offer higher-paying jobs, such as information, finance, and professional jobs, all declined.
However, the ADP’s positive job creation figures strongly deviate from the Labour Department’s claims data, which shows that 248,000 American workers filed for first-time unemployment benefits last week, marking an increase from the prior week’s downwardly-revised 236,000 figure.
Continuing claims, meanwhile, dipped to the lowest since February 2023, as 1.72 million Americans remain on unemployment benefits. This hints at potential complexities and discrepancies in the overall labor market picture, suggesting that a potential rotation is underway with workers shifting from high-paying to low-paying jobs.
Information for this briefing was found via the ADP, the DOL, and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.