WASHINGTON: American employers ratcheted back their hiring in August, which slowed for the second straight month, according to data Wednesday from payroll firm ADP. Private jobs increased by 132,000 this month, less than half the pace of July, when firms hired nearly 270,000 workers, ADP said in its newly revamped survey. The data, coming before Friday’s all-important government employment report, could be good news for the Federal Reserve which has been aggressively pushing up interest rates to tamp down red-hot inflation, amid fears the strong labor market will cause a wage spiral.
“Our data suggests a shift toward a more conservative pace of hiring, possibly as companies try to decipher the economy’s conflicting signals,” ADP chief economist Nela Richardson said. “We could be at an inflection point, from super-charged job gains to something more normal.” She noted that despite a slowdown in the housing sector-due to higher borrowing costs-hiring in construction has continued, increasing 21,000 in August, while manufacturing showed no gains.
There was notable strength in leisure and hospitality, which surged 96,000 in the month, “a sign people want to get back to a more normal existence,” she told reporters. ADP has added wage information to the monthly report, which showed that pay increased 7.6 percent over the past 12 months. But for workers who changed jobs, the pay gain was a remarkable 16.1 percent, the report said.
However, Richardson said there has been a “stabilization” of wage gains at these high levels, unlike last year when pay was ramping up. American consumers were much happier about the state of the economy in August, as worries about surging prices eased, according to a closely watched survey released Tuesday.
After three months of declines, the consumer confidence index jumped nearly eight points to 103.2 in August from 95.3 in July, The Conference Board said. The result far surpassed the modest pickup economists had expected, as sentiment improved on the current state of the economy as well as the outlook six months ahead. And Americans indicated they are more willing to spend, after retrenching last month, with vacation plans at the highest point this year, said Lynn Franco, senior director of economic indicators at The Conference Board.
The survey showed increased plans to buy homes, cars and appliances as well. Consumers flush with savings and government support money had been a key driver of the recovery of the world’s largest economy following the pandemic downturn. However, Franco cautioned: “Concerns about inflation continued their retreat but remained elevated.” The “improvement in confidence may help support spending, but inflation and additional rate hikes still pose risks to economic growth in the short term,” Franco said in a statement.
With inflation at a 40-year high, the Federal Reserve is on an aggressive campaign to stamp out surging prices, with steep interest rate increases. And Fed Chair Jerome Powell in a speech Friday doused any hopes the central bank would ease up or reverse course any time soon, a process he said would involve some “pain” to American families.
The present situation index rose for the first time since March, while the expectations index-which surged nearly 10 points to 75.1 –“improved from July’s nine-year low, but remains below a reading of 80, suggesting recession risks continue,” Franco said. And the survey showed a bit less optimism about the labor market, with a declining share of respondents rating jobs as “plentiful.”
Rubeela Farooqi of High Frequency Economics called the improvement “a positive development.” “However, in terms of consumer spending, momentum is likely to moderate as the Fed continues to raise rates over coming months,” she said in an analysis. -A FP