According to payroll processing firm ADP, the job market ended 2022 on a positive note. Companies have added much more positions than expected in December, outperforming estimates significantly. Private payrolls increased by 235,000, beating the Dow Jones estimate of 153,000. That’s more than 50% over what was initially expected. Compared to the previous month’s report, there’s a growth of 127,000.
The goods-producing sector saw a modest increase of 22,000, while the service sector saw a significant increase of 213,000. Leisure and hospitality are leading within the service sector, with 123,000 added positions. Professional and business services also grew by 52,000, while education and health services added 42,000.
The strong job market has contributed to rising inflation, prompting the Federal Reserve to take action. The Fed has decided to raise interest rates seven times in 2022, totaling 4.25 percentage points. The central bank has identified labor market imbalances as a key area to address, as there are currently about 1.7 job openings for every available worker.
Wages have risen as a result, but living costs are still outpacing them by a solid margin. ADP reported that annual pay across all categories increased by 7.3% over the past year, with leisure and hospitality seeing a particularly large increase of 10.1%.
Job growth was evenly distributed between small and medium-sized businesses, which together added 386,000 workers. In contrast, companies with more than 500 employees saw a decline of 151,000. Overall, payroll growth for the year averaged nearly 300,000 per month, according to ADP data.
The growth has occurred despite negative economic growth in the first two quarters, often considered a sign of a recession and the Fed’s tightening efforts. At their December meeting, central bank policymakers announced a new plan. The idea is to continue raising rates without anticipating any reductions, at least through 2023.