The U.S. labor market could see trouble in the months ahead.
The private sector added 106,000 jobs in January, payroll firm ADP Inc. said Wednesday. That’s still considered relatively healthy as annual pay rose 7.3 percent year-over-year. And ADP data indicated that people who changed jobs go themselves a 15.4 percent average pay bump. But the January job gains still came in below the 253,000 in December. Plus, January’s increase was significantly below the 190,000 economists had expected, according to a Dow Jones estimate.
ADP chief economist Nela Richardson attributed the decline in January to weather-related disruptions on employment, such as California’s record floods and back-to-back storms resulting in ice and snow to the central and eastern U.S..
Service-providing industries led job growth, offset by 3,000 jobs lost in goods production sectors. Within production, construction lost 24,000 jobs, while manufacturing created 23,000. The balance of 2,000 jobs lost came from natural resources and mining. As for services, most of the job gains were in leisure and hospitality, which created 95,000 jobs. Financial services grew by 30,000. However, retail trade—merchandise sold at wholesale and retail—is part of the trade-transportation-utilities group, which lost 41,000.
Retail isn’t exactly creating jobs at the moment. A Kohl’s reorg last month shed 60 workers at corporate headquarters. Saks.com is dropping 100 tech jobs. The Bay, the e-commerce operation of Canadian department store retailer Hudson’s Bay, is also planning corporate layoffs. Other retail layoffs are in the works. Word surfaced last month that the British fashion e-tailer Boohoo plc is also planning layoffs. Rival Asos will cut headcount as it tries to reverse a financial freefall that saw it lose 31.9 million pounds ($35.8 million) for the fiscal year ended Aug. 31, 2022.
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Store closings will also put pressure on retailers’ efforts to create new jobs. Fast-fashion retailer H&M said in November that it would cut 1,500 jobs to save about 2 billion Swedish krona ($193.8 million). It’s planning to open 100 new stores and close 200 this year. Currently, four locations in the U.K. on are the closure list, with one store each in Burton and Maidenhead already shuttered and one each in Hartlepool and the Isle of Wright about to be closed. “Most of the openings will be in growth markets, while the closures will mainly be in established markets,” H&M said. The planned 100 net-store closures are on top of the 145 net-door decreases in 2022, when the company opened 95 new stores and closed around 240 locations.
In the U.S., December saw a sharp rise in job openings, jumping by 572,000 to 11.0 million. That represents the highest level since July. Economists at Wells Fargo noted that openings in retail “leapt 134,000 despite the dismal end to the holiday sales season,” although seasonal factors may play a part in the openings. But the “increase was narrowly concentrated in industries where deteriorating demand may be giving employers cold feet about filling open positions,” they wrote in Wednesday’s report, which noted a “slightly worse mix of separations,” as quits edged down and layoffs ticked up, suggesting that the labor market is cooling off.
Meanwhile, the nonfarm payrolls report from the U.S. Labor Department is set to be released on Friday. It captures data differently from ADP and results between the two sometimes vary.
So far, signs of easing inflation and possible slowdown in job growth are areas that the Federal Reserve is keeping tabs on to determine the pace of interest rate increases and by how much. On Wednesday, the Fed again raised its benchmark rate, although this time by just 25 basis points. That’s the smallest rate hike since the Fed began raising rates in March 2022, suggesting that its moves to tamper inflation are working. One notable difference in its public statement from prior ones is that the latest job market assessment omitted language indicating that employment gains have been “robust.” And while the Fed appears to be scaling back on the rate increases, it also signaled it would continue raising rates but gave no indication on when the hikes might end.