The Fed is keeping its pedal to the metal against inflation. As a result, eyes are on the labor market to see if it deteriorates due to tighter financial conditions.
Today kicked off the three big days of employment data we typically get at the beginning of each month. 📆
The ADP Employment report was unavailable for the last two months as they updated their methodology, and today it’s back. August’s private payroll growth came in at 132,000, well below the 300,000 estimated and a notable deceleration from July’s 268,000 print. 📉
One interpretation of the report suggests the economy’s conflicting signals lead to a more conservative pace of hiring, though August’s numbers tend to be very volatile. Service industries saw the most growth, while financial activities, education and health services, and professional and business services saw declines.
And from an inflation perspective, annual pay was up 7.6% YoY. Additionally, the median pay increase for job switchers was 16.1%, as firms need to entice talent in a labor market where job openings outnumber workers by 2:1. 😮
Overall, this is not great news for the Fed. Wage increases tend to be a sticky form of inflation, and the numbers continue to run hot. We’ll have to see if tomorrow and Friday’s data confirm the ADP numbers from today. 👀