ADP employment hits a new low for the year, as the Federal Reserve's policy path faces more tests.

ADP Research released data on Wednesday showing that the U.S. private sector added 44,000 jobs in July, falling short of market expectations and marking the smallest increase since the beginning of the year, indicating a cooling trend in the recent robust hiring momentum. The previous value was revised to 95,000. July's job additions were below the expectations of all economists surveyed. Although hiring has slowed, the report indicates that wage growth for job changers accelerated to its highest level in nearly a year. The data suggests that the labor market remains stable, buoyed by strong demand from businesses and consumers. If the official monthly employment report released this Friday confirms this trend, the recent labor market performance may imply that Federal Reserve officials can continue to focus on the persistently high inflation. Federal Reserve Chair Kevin Warsh said last week after a policy meeting that the labor market is "robust" and "stable," at which time policymakers maintained interest rates, although three officials voted in favor of raising rates. The ADP report is jointly prepared by ADP and the Stanford Digital Economy Lab and is released ahead of the more comprehensive and closely watched July employment report from the Bureau of Labor Statistics (BLS) this Friday. Historical data shows that the ADP figures do not consistently predict the BLS private employment estimates. Wage Growth The ADP report also showed that wages for job changers rose 7% year-on-year, while wage growth for those who remained in their positions held steady at 4.4%. In terms of industry, the wage growth was more significant in financial activities and manufacturing. ADP Chief Economist Nela Richardson stated, "Job changers are highly sensitive to real-time economic conditions, and their rapid wage growth indicates supply constraints in some areas of the labor market." The government employment report to be released on Friday (including public sector recruitment) is expected to show that U.S. nonfarm employment increased by 80,000 in July, an improvement from the official data in June (when hiring had slowed). According to ADP data, the education and health services sector added 36,000 jobs, while the leisure and hospitality sector saw a decline of 11,000 jobs. More than half of the new jobs came from small businesses. ADP data is based on payroll records covering over 26 million employees in the private sector across the United States. Additionally, the JOLTS report released by the Bureau of Labor Statistics on Tuesday indicated that in June, there were 1.04 job openings for every unemployed person in the U.S., roughly unchanged from May. Market surveys indicate that economists expect July's private sector employment to increase by 78,000 (compared to a 49,000 increase in June), with overall nonfarm employment expected to rise by 80,000 (up from a 57,000 increase in June), and the unemployment rate projected to hold steady at 4.2%. However, there is a slight risk of an uptick in the unemployment rate. A survey released last week by the Conference Board indicated that the proportion of consumers who felt that jobs were "plentiful" fell to the lowest level since February 2021, suggesting that the labor market may face marginal pressure.