US hiring at companies slowed again in August, dipping to a rise of 99,000 over the previous month, according to the ADP Employment Report. The downshift marks the softest pace since January 2021. “The job market’s downward drift brought us to slower-than-normal hiring after two years of outsized growth,” says Nela Richardson, chief economist, ADP. “The next indicator to watch is wage growth, which is stabilizing after a dramatic post-pandemic slowdown.”
Hiring may be slowing in the US, but if that’s a sign of concern for the labor market it’s not yet showing up in new filings for unemployment benefits. This leading indicator for the labor market fell to a two month low for the week through August 31 and remains at an historically subdued level. “There are signs of a slowdown in hiring with fewer job openings, but until payroll jobs actually decline there is no recession,” says Christopher Rupkey, chief economist at FWDBONDS. “At the moment, it does not look like the Fed is behind the curve.”
The ISM Services Index ticked up in August, indicating that a modest pace of growth for this key sector continued. “For a second straight month, the slow growth indicated by the Services PMI reading was reinforced by panelists’ comments,” says Steve Miller, Chair of the ISM Services Business Survey Committee.
Another survey-based measure of the services sector points to a stronger growth profile in August relative to the ISM data. The S&P Global US Services PMI rose to 55.7 last month, marking the strongest advance since March 2022. “An improvement in the headline services PMI to its highest for nearly two-and-a-half years provides further encouraging evidence that the US economy is enjoying robust economic growth in the third quarter, adding to signs of a ‘soft landing'”, says Chris Williamson, chief business economist at S&P Global Market Intelligence.
Although some analysts continue to see rising recession risk, TMC Research’s US GDP nowcast for the third quarter points to a slower but still solid pace of growth. The model indicates output is expected to rise 2.2% (for the median estimate). That marks a downshift from Q2’s strong 3.0% increase, but the current nowcast reflects economic activity that’s still unfolding at a respectable rate, based on 11 factors. If the nowcast is correct, a recession is highly unlikely to start in Q3, notes the research shop, which is a division of The Milwaukee Company, a wealth manager. The government’s official Q3 GDP report is scheduled for release on Oct. 30.
