Small businesses are the “highlight and standout” of the nation’s 324,000 jobs gain during July, according to Nela Richardson, Chief Economist for ADP.
Small businesses added 237,000 jobs. In businesses with 1-19 employees, job gains were 114,000; in businesses for 20-49 employees, job gains were 123,000.
“We have been seeing a dominance of consumer-facing industries, but the real dominance has been with small businesses,” Richardson said. “For the past few months, two-thirds of the net new hiring has been done by companies with fewer than 50 employees.”
The rest of the job gains were seen in “smaller” medium businesses with 50 to 249 employees. In that category, 152,000 jobs were gained. However, in larger medium businesses, with 250 to 499 employees, 14,000 jobs were lost.
Large firms, with greater than 500 employees, lost 67,000 jobs.
What’s Behind the Shift in Job Gains?
Are post-pandemic workers reluctant to return to workplaces with great numbers of employees? Richardson pointed out that the hiring data doesn’t measure worker preferences. However, the data does support certain trends.
“We’re not seeing the same labor market,” Richardson said. She added that the labor market is showing “strength in pockets.”
Small Business Deals
The bulk of the job gains, 303,000, were in service providing jobs. Leisure and Hospitality jobs led with way with a gain of 201,000 jobs.
Goods producing companies gained just 21,000 jobs.
“Will the US economy achieve a soft landing?” Richardson asked. “Manufacturing is a good indicator of the strength of the economy.”
Here’s the breakdown of the 21,000 goods-producing job gains:
- Natural resources/mining 48,000
- Construction 9,000
- Manufacturing -36,000
Richardson said that the economy is doing “better than expected.”
“A healthy labor market continues to support household spending,” Richardson said. “We continue to see a slowdown in pay growth without broad-based job loss.”
July 2023 Report Highlights
Private employers added 324,000 jobs in July.
Job creation remained robust in July, with leisure and hospitality again driving growth. One weakness was manufacturing, an interest rate-sensitive industry that shed jobs for the fifth straight month.
Richardson explained that manufacturing as an industry is “interest rate sensitive” due to the cost of capital spending, such as for buildings and equipment.
Breakdown of Service Providing Jobs
- Trade/transportation/utilities: 30,000
- Information: 36,000
- Financial activities: -5,000
- Professional/business services: 5,000
- Education/health services: 12,000
- Leisure/hospitality: 201,000
- Other services: 24,000
Pay growth continued its downward trend in July.
Job stayers saw a year-over-year pay increase of 6.2 percent, the slowest pace of gains since November 2021. For job changers, pay growth slowed to 10.2 percent.
Median Change in Annual Pay (ADP matched person sample)
- Job-Stayers: 6.2%
- Job-Changers: 10.2%
Median Change in Annual Pay for Job-Stayers by Industry Sector
- Natural resources/mining: 6.2%
- Construction: 6.4%
- Manufacturing: 5.7%
- Trade/transportation/utilities: 6.0%
- Information: 5.5%
- Financial activities: 6.4%
- Professional/business services: 6.0%
- Education/health services: 6.7%
- Leisure/hospitality: 7.2%
- Other services: 6.1%
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