With job boom in restaurants 'behind us,' expect slower payroll growth in 2024
One of the largest contributors to the post-pandemic job market boom is cooling off.
New data from ADP released on Wednesday revealed the US added 103,000 private payroll jobs, below economist expectations for 110,000 job gains. One of the largest lagging sectors was leisure and hospitality, an industry that previously couldn't find enough workers during the heat of the pandemic. The sector lost 7,000 jobs in November.
“Restaurants and hotels were the biggest job creators during the post-pandemic recovery,” said Nela Richardson, chief economist at ADP. “But that boost is behind us, and the return to trend in leisure and hospitality suggests the economy as a whole will see more moderate hiring and wage growth in 2024.”
Wednesday's data is in line with other signs that the labor market is normalizing from the pandemic. On Tuesday, the latest Job Openings and Labor Turnover Survey, or JOLTS report, revealed the ratio of job openings to the number of unemployed workers fell to 1.34, its lowest reading since August 2021. The unemployment rate has ticked higher over the last several months, rising from its several-decade low, and employees haven't been leaving their jobs at the same pace as they did during the "quiet quitting" era of 2021.
That could be in part because the reward for leaving has diminished. ADP data shows annual wage growth for workers who changed jobs fell to 8.3% in November, the slowest pace of growth since June 2021. Meanwhile, workers who kept the same job saw wages rise 5.6% last month, the lowest since September 2021. The reward for switching jobs is now the smallest it's been in the three years ADP has tracked the data point.
Markets celebrated the ADP data Wednesday, with all three major averages in the green mid-morning. Investors hope signs of a cooling labor market will lead the Fed to hold interest rates steady for the remainder of the year and bring them down in 2024.
The next update on the labor market will come with weekly jobless claims Thursday followed by the crucial November jobs report on Friday morning.
Economists surveyed by Bloomberg expect the monthly report to show 187,000 nonfarm payroll jobs were added to the US economy last month, an uptick from October's 150,000, with unemployment remaining flat at 3.9%.
Josh Schafer is a reporter for Yahoo Finance.
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