2026-01-08
US December ADP Jobs rebound 41K, Below Expectations
U.S. private sector employment increased by 41,000 in December, rebounding from a revised decline of 29,000 in November. The turnaround suggests early signs of stabilization in the labor market, although the gain still fell short of market expectations of 47,000. This marked the first notable rebound after several months of weak private-sector job growth in the second half of 2025. However, the overall increase remained modest, reflecting a slowdown in cumulative employment growth since the beginning of the year, as hiring sentiment continues to be constrained by a high interest rate environment.
Sectoral Breakdown and Structural Insights:
Education and health services added 39,000 jobs, while leisure and hospitality increased by 24,000, serving as the primary drivers of job growth.
Trade, transportation, and utilities added 11,000 jobs, financial services rose by 6,000, and natural resources, mining, and construction each posted gains of 1,000 jobs.
Professional and business services shed 29,000 jobs, information services declined by 12,000, and manufacturing fell by 5,000. Overall, goods-producing industries remained in contraction.
By firm size, medium-sized companies led job creation with an increase of 34,000 jobs, followed by small businesses adding 9,000 jobs, while large enterprises recorded only a marginal gain of 2,000 jobs.
In terms of wages, annual pay growth for job stayers remained unchanged at 4.4%, while job switchers saw wage growth accelerate to 6.6% from 6.3%, highlighting continued divergence within the labor market.
Overall, elevated interest rates continue to weigh on corporate expansion, while cautious consumer spending has weakened demand for professional services and manufacturing labor. Nevertheless, seasonal demand during the year-end consumption period provided some support for service-sector hiring. The recovery in small and mid-sized business hiring suggests relatively manageable cost pressures, whereas large enterprises remain cautious amid heightened economic and policy uncertainty. The labor market continues to exhibit K-shaped divergence, with high-income consumption supporting health and leisure-related industries, while manufacturing remains under sustained pressure.
The December ADP report indicates that U.S. private-sector employment has stabilized and rebounded modestly, though growth fell short of expectations, underscoring limited labor market resilience and signaling a potential slowdown in economic growth in 2026. In the near term, employment data are expected to remain moderate, and the Federal Reserve may delay the pace of rate cuts while monitoring inflation trends. This week’s nonfarm payrolls report will be a key indicator to watch. Over the medium term, if hiring momentum remains subdued, the unemployment rate could rise above 4.6%, potentially prompting the Fed to implement one to two rate cuts in the first half of 2026 to support equity and bond markets. However, uncertainty surrounding trade policy is likely to add to market volatility.
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