Private-sector job growth slows, jobless claims plunge in mixed labor market data
Private-sector employers unexpectedly slowed their hiring in December, but jobless claims fell to near a four-decade low as new data sent mixed signals about the labor market ahead of Friday’s jobs report.
U.S. companies added 153,000 net new jobs last month, down significantly from 215,000 in November, payroll firm Automatic Data Processing said Thursday. Analysts had expected a smaller drop, to about 172,000.
At the same time, the Labor Department said Thursday that applications for first-time unemployment benefits fell to 235,000 last week from 263,000 the previous week.
Last week’s figure was near a 43-year low of 233,000 reached in November and marked the 96th straight week of claims below the 300,000 level that indicates a healthy labor market. That streak is the longest since 1970.
The ADP and jobless claims data are viewed as harbingers of overall job growth in the private and public sectors.
On Friday, the Labor Department is expected to report solid job gains in December. Analysts are forecasting the economy added 175,000 net new jobs, down just 3,000 from November.
The unemployment rate is expected to tick up to 4.7% from a more than nine-year low of 4.6% the previous month.
“Job growth remains strong but is slowing,” said Mark Zandi, chief economist at Moody’s Analytics, which assists ADP in preparing its report.
“Smaller companies are struggling to maintain payrolls while large companies are expanding at a healthy pace,” he said.
Businesses with no more than 19 employees reduced their payrolls by 3,000 in December after adding 9,000 net new jobs the previous month.
Meanwhile, large businesses — those with 500 or more employees — had a smaller reduction in their hiring pace, to 63,000 from 90,000 in November.
Chris Rupkey, chief financial economist at Mitsubishi UFG Financial Group, said the hiring problems at small companies weren’t a good sign.
“Small business tends to create a lot of new jobs in business cycles and if they are exhibiting more caution this could throw a monkey wrench into President-elect Trump’s campaign pledge to create 25 million jobs in the next 10 years,” Rupkey said.
But Rupkey was heartened by the falling jobless claims and is forecasting overall job growth in December will be 210,000.
“The economy is stronger than you think with the labor market at full unemployment,” he said. “Bet on it.”
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