Washington (AFP) – Hiring in the US private sector slowed more than anticipated in August, according to payroll firm ADP on Thursday, as all eyes turn to the jobs market to gauge the economy’s health. A rapidly weakening labor market could nudge the central bank towards cutting interest rates to boost the world’s biggest economy, as policymakers balance between inflation and employment risks.
Private sector employment rose by 54,000 jobs last month, ADP said, down from a revised 106,000 in July. “The year started with strong job growth, but that momentum has been whipsawed by uncertainty,” ADP chief economist Nela Richardson said in a statement. She added that the hiring slowdown could be explained by issues ranging from labor shortages to “skittish consumers.”
While there remained job gains in areas like leisure and hospitality, industries including manufacturing and trade, transportation and utilities lost jobs. “The labor market is showing signs of cracking. It’s not a red siren alarm yet, but the signs keep growing that businesses are starting to cut workers,” warned Navy Federal Credit Union chief economist Heather Long. Apart from ADP’s data, new jobless claims last week also hit their highest level since late June, she said.
“Hiring is frozen in most industries. Companies are reluctant to hire with so much uncertainty around tariffs and trade,” Long added. The report comes a day before the United States is set to report official hiring and unemployment numbers. The most recent hiring figures showed that the labor market was weaker than expected, sparking worries. ADP numbers, however, sometimes diverge from the government’s data.
The ADP report on Thursday showed that year-on-year pay growth was 4.4 percent for those who stayed in their jobs, and 7.1 percent for those who changed jobs. A separate report released Thursday showed that US services sector activity ticked up in August, helped by business activity and new orders. The Institute for Supply Management (ISM) services index rose to 52 percent last month, from 50.1 percent in July.
But continued contraction in the employment index was a drag on the overall figure, while ISM survey respondents have been increasingly citing the effects of Trump’s tariffs. US businesses have been grappling with heightened uncertainty this year as they face rapidly changing tariff policies announced by President Donald Trump. After returning to the presidency in January, Trump imposed a 10-percent duty on almost all trading partners, before hiking levels for dozens of these economies. He has also progressively rolled out separate duties on sector-specific imports such as steel, aluminum, and autos.
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