Hiring Flatlines as Fed Still Eyes a Rate HIKE — Not a Cut
Private employers added just 38,000 jobs in August, the weakest pace since January, according to ADP — but with inflation running hot, traders still see real odds the Federal Reserve raises rates at its September meeting instead of cutting them.
Corporate America barely bothered to hire in August — and the Federal Reserve may raise interest rates anyway.
Private employers added just 38,000 jobs last month, the slowest pace of hiring since January and well below the roughly 47,000 Wall Street expected, according to the ADP National Employment Report released Wednesday morning. July's initially soft 44,000 print was revised up to 46,000, but the trend line is unmistakably flattening.
The damage wasn't evenly spread. Manufacturing shed 17,000 positions and professional and business services cut 16,000, while education and health services (+45,000) and leisure and hospitality (+16,000) did almost all of the heavy lifting. Construction added 12,000 jobs even as natural resources and mining lost 5,000.
Pay Still Outrunning Hiring
Wages tell a more complicated story than headcount. Workers who switched jobs saw gross pay jump 7.3% year-over-year, versus 4.4% for those who stayed put — a gap ADP says reflects a labor market that's cooling in volume but still competitive at the margins.
"Pay can tell us a lot about today's choppy hiring. To understand hiring patterns, you have to look deeply into where pay growth is accelerating, where it's slowing, and for whom," said ADP chief economist Dr. Nela Richardson.
Normally, a jobs report this soft would all but guarantee the Fed cuts rates, or at least holds steady, at its September 15-16 meeting. Instead, traders are pricing in real odds of a hike. New Fed Chair Kevin Warsh spooked markets at last month's Jackson Hole symposium with hawkish remarks on inflation, and futures tracked since have shown hike odds swinging as high as the mid-60% range — an unusual setup where weak hiring and hawkish policy are colliding at once.
Wall Street shrugged off the mixed signals Wednesday morning. The S&P 500 and Dow both edged higher as stocks recovered from Tuesday's selloff, even as the 10-year Treasury yield touched 4.814%, its highest level since November 2023. Investors are also bracing for a trio of after-the-bell earnings reports from Broadcom, Snowflake and Hewlett Packard Enterprise, plus Friday's more closely watched nonfarm payrolls report from the Bureau of Labor Statistics, which economists expect to show a modest rebound after July's surprise 23,000 decline.
For now, the ADP numbers leave the Fed boxed in: hire fewer workers, but don't expect cheaper money.