U.S. Private Payrolls Fall Sharply, Miss Expectations in December

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U.S. Private Payrolls Fall Sharply, Miss Expectations in December/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ U.S. private payrolls rose by just 41,000 in December, missing economists’ forecasts. The ADP report showed continued labor market sluggishness, especially in manufacturing and professional sectors. Economists caution against relying too heavily on ADP’s accuracy.

Businesses — A hiring sign is shown in Downers Grove, Ill., Thursday, June 24, 2021. The number of Americans collecting unemployment benefits slid last week, another sign that the job market continues to recover rapidly from the coronavirus recession. Jobless claims dropped by 24,000 to 400,000 last week, the Labor Department reported Thursday, July 29, 2021. (AP Photo/Nam Y. Huh, File)

U.S. Payroll Growth Quick Looks

U.S. private sector adds only 41,000 jobs in December
Economists expected a stronger gain of 47,000 jobs
November job losses revised to 29,000 from 32,000
Services sector led gains with 44,000 new positions
Professional and business services lost 29,000 jobs
Manufacturing payrolls fell by 5,000; construction rose by 1,000
Goods-producing sector shed a total of 3,000 jobs
ADP report often diverges from official BLS payroll data
Economists expect 64,000 private jobs in Friday’s BLS report
Unemployment rate forecast to dip to 4.5% in December

U.S. Private Payrolls Growth Fell Sharply, Miss Expectations in December

Deep Look

U.S. private payrolls increased by just 41,000 in December, falling short of economists’ expectations and signaling a continued slowdown in job growth, according to the latest ADP National Employment Report released Wednesday.

The figure reflects a modest rebound from November, when private employment was revised to show a loss of 29,000 jobs. However, the December number still came in below the 47,000 jobs anticipated by economists surveyed by Reuters.

The report, developed in partnership with the Stanford Digital Economy Lab, points to a labor market struggling to gain traction amid weaker hiring trends, economic uncertainty, and evolving business dynamics such as automation.

“The visual signal from today’s headline is that jobs were gained in December, but at a relatively slow pace,” said Carl Weinberg, chief economist at High Frequency Economics.

Gains in December were largely concentrated in the services sector, which added 44,000 positions. However, the headline number was dragged down by a 29,000-job loss in the professional and business services category, along with a 12,000-job decline in the information sector.

On the goods-producing side, the picture remained subdued. The sector overall lost 3,000 jobs. Manufacturing saw the largest decline, with payrolls shrinking by 5,000 positions. Construction added just 1,000 jobs, reflecting weak demand and caution among employers.

Despite the limited growth, layoffs remain historically low. Economists attribute this to businesses’ hesitance to part with workers amid labor shortages and broader uncertainty. However, hiring remains constrained due to factors including weak demand and business concerns around import tariffs and regulatory policy.

Additionally, some firms are increasingly integrating artificial intelligence and automation to reduce reliance on human labor, especially in white-collar and administrative roles, further limiting hiring in sectors like information and professional services.

The ADP report serves as a prelude to the more comprehensive and widely watched U.S. Bureau of Labor Statistics (BLS) employment report, due Friday. The BLS data includes both private and public sector employment and is often considered more reliable, as the ADP figures have a history of divergence from official numbers.

“ADP’s payroll estimate continues to attract more attention than warranted by its track record,” said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. “Since the methodology change in August 2022, its first estimate has, on average, differed from the government’s initial private payroll figure by 83,000.”

For December, economists expect the BLS to report an increase of 64,000 private-sector jobs, up from 69,000 in November. However, with further job losses anticipated in the public sector, total nonfarm payrolls are expected to rise by about 60,000, a modest gain.

More attention, though, is likely to be focused on the unemployment rate. After spiking to 4.6% in November — the highest in over four years — economists now forecast it will edge down slightly to 4.5% in December.

The November spike was partially distorted by the 43-day federal government shutdown, which delayed and disrupted the collection of household data for the October employment report. As a result, the unemployment rate for October was not published — the first time such a data gap has occurred since the government began tracking unemployment figures in 1948.

Overall, the labor market appears to be softening, but not collapsing. Businesses are exercising caution in their hiring plans, and job growth is slowing as the economy adjusts to higher interest rates, AI-driven transformation, and policy unpredictability heading into 2026.

As always, markets and policymakers will be watching Friday’s BLS report closely for confirmation of broader labor trends and signals about the health of the U.S. economy heading into the new year.