US private payrolls increase solidly; wage growth cools

US private payrolls increase solidly; wage growth cools

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WASHINGTON — U.S. private employers boosted hiring in April amid strong demand for workers in the leisure and hospitality industry, but a slowdown in wage growth offered some good news for the Federal Reserve’s fight against inflation.

Private payrolls increased by 296,000 jobs last month, the ADP National Employment Report showed on Wednesday. Data for March was revised lower to show 142,000 jobs added instead of the previously reported 145,000. Economists polled by Reuters had forecast private employment would increase 148,000.

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The goods producing industry added 67,000 jobs, mostly in natural resources, mining and construction. Manufacturing shed 38,000 positions.

Payrolls in the service-providing sector increased by 229,000 jobs, driven by a rise of 154,000 in the leisure and hospitality industry. Education and health services added 69,000 positions. But financial activities lost 28,000 jobs, while professional and business services payrolls fell 16,000.

“We expect payrolls to remain positive for now,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York. “But the pace should moderate as the lagged and cumulative effects of monetary policy spread more broadly through the economy.”

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Wage growth moderated, with the median annual change for job changers dropping to 13.2%, the slowest pace since November 2021, from 14.2% in March.

The Fed is expected to raise its benchmark overnight interest rate by another 25 basis points to the 5.00%-5.25% range at the end of a two-day policy meeting on Wednesday before potentially pausing the U.S. central bank’s fastest monetary policy tightening campaign since the 1980s.

Higher interest rates are cooling demand for workers and hiring could be eroded by a tightening in bank lending following recent financial market turmoil. A standoff to raise the federal government’s $31.4 trillion borrowing cap also poses a grave risk to the economy and ultimately the labor market.

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Treasury Secretary Janet Yellen warned on Monday that the government could run out of money within a month.

TIGHT LABOR MARKET

The government reported on Tuesday that there were 9.6 million job openings at the end of March, the lowest since May 2021. Nevertheless, the labor market remains tight, with 1.6 job openings for every unemployed worker in March, well above the 1.0-1.2 range that economists say is consistent with a jobs market that is not generating too much inflation.

The ADP report, jointly developed with the Stanford Digital Economy Lab, was published ahead of the Labor Department’s Bureau of Labor Statistics’ more comprehensive and closely watched employment report for April on Friday.

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It has not been a reliable gauge in forecasting private payrolls in the BLS employment report.

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According to a Reuters survey of economists, private payrolls likely increased by 160,000 jobs last month.

With gains anticipated in government employment, total nonfarm payrolls are forecast to have risen by 179,000 jobs last month after a gain of 236,000 in March.

“Given the ADP’s poor record as a predictor of nonfarm payrolls, we still think that, based on the upward trend in initial jobless claims and the downward trend in job openings, the latter increased by a more modest 180,000 last month,” said Paul Ashworth, chief North America economist at Capital Economics in Toronto. (Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao)

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