US private payrolls rise just 38,000 in August as hiring momentum weakens: ADP

US private employers added jobs at a slower-than-expected pace in August, with hiring increasingly concentrated in healthcare and a handful of other industries, suggesting the labor market is losing momentum as the Federal Reserve weighs its next policy moves.

Payrolls processor ADP said Wednesday that private-sector employment increased by 38,000 last month, down from an upwardly revised gain of 46,000 in July and well below the 47,000 increase economists polled by Dow Jones had expected.

The August increase was the smallest since January and points to a broader cooling in employment conditions.

More importantly, the headline gain masked weakness across several major parts of the economy, with most new jobs coming from a limited number of industries.

Healthcare leads a narrow employment gain

Education and health services accounted for the largest increase, adding 45,000 positions.

Healthcare has remained one of the more resilient sources of employment as demand for medical services continues to support hiring.

Leisure and hospitality added 16,000 jobs, while construction employment increased by 12,000.

Beyond those sectors, however, the employment picture was considerably weaker.

Manufacturing shed 17,000 jobs, while professional and business services lost 16,000.

Natural resources and mining, as well as trade, transportation and utilities, each recorded declines of 5,000 positions.

The concentration of hiring also extended across company size.

Businesses with at least 500 employees added 34,000 jobs, accounting for the overwhelming majority of the increase.

Companies with fewer than 50 employees added just 3,000 positions.

Wage growth remains relatively steady

Despite the slowdown in hiring, wage growth showed little change.

ADP introduced a new breakdown this month separating base pay from gross pay, which includes tips, commissions, bonuses and other forms of compensation.

For workers who remained in their jobs, base pay increased 3% from a year earlier, unchanged from July, while gross pay rose 4.4%.

Across all workers, base pay increased 3.2%, and gross pay climbed 4.7%.

"Pay can tell us a lot about today's choppy hiring," said Nela Richardson, chief economist at ADP.

"To understand hiring patterns, you have to look deeply into where pay growth is accelerating, where it's slowing, and for whom. Once-predictable wage growth has been overtaken by the complexities of demographic change, persistent inflation, and AI's effects on jobs," she said.

More jobs are available, but hiring is weakening

Separate government data released Tuesday offered a similar mixed picture.

The Labor Department's Job Openings and Labor Turnover Survey showed that job openings increased by 89,000 to 7.271 million at the end of July.

The openings rate rose to 4.4% from 4.3% in June.

There were 1.05 job openings for every unemployed person, little changed from June, suggesting that labor demand remains relatively stable.

Yet employers were less willing to turn those openings into new hires.

Hiring fell by 278,000 to 5.054 million, while the hiring rate declined to 3.2% from 3.4%.

Professional and business services accounted for much of that decline, with hiring in the sector falling by 188,000.

At the same time, layoffs remained contained.

Employers cut 119,000 fewer workers in July, bringing layoffs and discharges down to 1.666 million. The layoff rate fell to 1% from 1.1%.

The combination of fewer hires and limited layoffs points to a labor market that is becoming more cautious rather than one undergoing widespread job destruction.

Focus shifts to Friday's payrolls report

The ADP figures arrive ahead of Friday's closely watched nonfarm payrolls report from the Bureau of Labor Statistics.

Economists expect the official report to show an increase of 53,000 jobs in August, following a 23,000 decline in July.

The unemployment rate is forecast to remain at 4.1%.

The contrast between job openings and actual hiring will be particularly important.