ADP: Wage Growth Hits Three-Year Low as Labor Market ‘Downshifts’

America’s employment picture ended the year on a down note, ADP’s latest findings show.

“The labor market downshifted to a more modest pace of growth in the final month of 2024, with a slowdown in both hiring and pay gains,” Nela Richardson, chief economist, ADP, said in an announcement accompanying the group’s monthly employment report Wednesday (Jan. 8).

“Health care stood out in the second half of the year, creating more jobs than any other sector,” Richardson added.

The report showed the private sector adding 122,000 jobs in December, with annual pay up 4.6% year over year. However, hiring slowed in several industries, the report showed, with employment in manufacturing falling for the third straight month.

That sector lost 11,000 jobs during the month, the largest area of decline. Adding the most jobs were the healthcare/education (57,000) and construction (27,000) industries.

As for wages, the 4.6% growth for people staying with their jobs was the slowest pace of gains since July 2021, ADP said. For people changing jobs, the growth came to 7.1%, down slightly from November.

The report comes amid a time of some uncertainty for the labor market, as PYMNTS wrote earlier this week after the release of  the Job Openings and Labor Turnover Survey (commonly known as the JOLTS report) from the Bureau of Labor Statistics.

That survey showed job openings up in November, from 7.8 million in October to 8.1 million. Still, that figure is 9.3% lower than November 2023.

“Other indicators such as hires, layoffs and the unemployment rate sent discomforting signals,” PYMNTS wrote. “Overall layoffs and discharges were 1.8 million in the latest month, up from October’s 1.7 million.”

Research also finds worries among workers, with 31% of people saying they are concerned about being laid off in the coming year. This fear ramps up among less financially stable workers, with 43% of people living paycheck to paycheck with trouble paying bills fearing layoffs.

This could lead consumers to curtail their spending, PYMNTS wrote. Recent PYMNTS Intelligence research, and coverage throughout last year, showed that 94% of paycheck-to-paycheck consumers had altered their retail shopping behavior due to perceived price increases.

“Additionally, these consumers spend an average of 43% of their income on housing, leaving less for other needs — particularly discretionary purchases and emergencies,” PYMNTS wrote.