ADP: Private Sector Job Creation Weaker in December, Small Businesses Struggle

The ADP National Employment Report by  153,000 people were added to private sector payrolls in December, missing the estimate for 170,000. The payroll processing firm said private sector payrolls in November were revised lower by 1,000, down to 215,000.

The goods-producing sector, which includes construction (-2,000), manufacturing (-9,000), natural resources and mining (-5,000)–lost 16,000 higher-paying jobs last month. The lower-paying service-providing sector carried all the weight in December, adding 169,000 in trade/transportation/utilities (+82,000), leisure/hospitality (+18,000) and education/health services (+29,000). Information lost 6,000 jobs.

“As we exit 2016, it’s interesting to note that the private sector generated an average of 174,000 jobs per month, down from 209,000 in 2015,” said Ahu Yildirmaz, vice president and head of the ADP Research Institute. “And while job gains in December were slightly below our monthly average, the U.S. labor market has experienced unprecedented seven years of growth that has brought us to near full employment. As we enter 2017, the tightening labor market will likely slow the growth.”

While Medium-size businesses (+71,000) and Large-size businesses (+63,000) added to the payrolls in December, Small-size businesses struggled to add 18,000. Businesses with 1-19 employees actually lost 3,000, which was offset by businesses with 20-49 employees adding 21,000.

“Job growth remains strong but is slowing. The gap between employment growth in the service economy and losses on the goods side persists,” Mark Zandi, chief economist of Moody’s Analytics, said. “Smaller companies are struggling to maintain payrolls while large companies are expanding at a healthy pace.”

More than 70% of all job creation in the U.S. is done by small businesses. But it was large businesses with 500-999 employees (+8,000) and 1,000+ employees (+56,000) that contributed to private sector payroll growth this month, which translates into lower wages for workers.