U.S. Job Growth Slows as Unemployment Claims Drop – Is the Labor Market Cooling?

The insured unemployment rate held steady at 1.2% for the week ending December 28, indicating no significant shift in the broader employment landscape. However, the number of insured unemployed rose by 33,000 to 1.867 million, reflecting potential softening in certain sectors. Despite this, the 4-week moving average for insured unemployment dipped by 3,000 to 1.865 million, suggesting a stabilizing trend.

Private Sector Job Growth Falls Short

Private-sector employers added 122,000 jobs in December, according to ADP, undershooting the Dow Jones forecast of 136,000 and declining from November’s 146,000. This marks the smallest monthly increase since August and highlights a deceleration in hiring momentum.

Wages rose by 4.6% on an annual basis, the slowest growth since July 2021. The moderation in pay growth may support the Federal Reserve’s view that inflationary pressures from wages are receding.

Sector Breakdown: Education and Health Lead, Manufacturing Declines

Job gains were concentrated in education and health services, which added 57,000 positions. Construction posted a solid increase of 27,000 jobs, while leisure and hospitality added 22,000. Financial activities contributed 12,000 new roles.

Conversely, manufacturing shed 11,000 jobs, reflecting continued weakness in the sector. Natural resources and mining lost 6,000 jobs, while professional and business services declined by 5,000.

The majority of new jobs stemmed from large companies with over 500 employees, contributing 97,000 positions. This suggests smaller businesses may be facing greater headwinds in hiring.