The United States private sector added more jobs than anticipated in December, payroll firm ADP said Thursday, signaling a strong labor market could continue to support the economy despite higher interest rates.
The world's top economy saw private sector employment rise by 164,000 jobs in the final month of 2023, ADP said, significantly above November's revised 101,000 figure.
This was led by hiring in leisure and hospitality, although other areas like manufacturing faced losses.
"We're returning to a labor market that's very much aligned with pre-pandemic hiring," said ADP chief economist Nela Richardson in a statement.
Wage growth slowed as well last month, with workers who stayed in their jobs seeing salaries rise 5.4 percent from a year ago -- a cooldown from the month prior.
The deceleration started in September 2022, the report noted.
"Now that pay growth has retreated, any risk of a wage-price spiral has all but disappeared," Richardson added, referring to a situation where higher wages spark price increases.
The US jobs market has shown resilience, supporting consumption, in the face of rapid interest rate hikes by the Federal Reserve aimed at easing demand and lowering inflation.
In December, ADP noted that service-providing industries added 155,000 jobs, while goods producing sectors added 9,000 roles.
Manufacturing, however, logged losses of 13,000.
While private payrolls jumped more than analysts expected last month, the average pace of increase has slowed from 2022 to 2023, said Rubeela Farooqi, chief US economist at High Frequency Economics.
She sees the labor market cooling further as high interest rates bite.
But Farooqi added: "We expect job growth to remain positive and expect the unemployment rate to remain low, as monetary conditions become less tight on Fed rate cuts this year."
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