New economic data showed showed hiring in the US labor market continues to slow, but layoffs remain low.
Data from ADP Wednesday morning showed 122,000 private payrolls were added in December, down from the 144,000 additions seen in November.
Meanwhile, the latest reading of initial jobless claims from the Department of Labor showed 201,000 claims for unemployment benefits were filed in the week ending Jan. 4, a drop of 10,000 from the previous week and below the 215,000 expected by economists.
ADP chief economist Nela Richardson told Yahoo Finance that a low number of layoffs remains key to why the labor market is "stable" for now.
"That's precisely why [we saw] stability in the 2024 labor market," Richardson said. "You had low layoffs, low quits."
But there have been signs overall of slowing in the labor market and the looming question is how far it will go. While job openings increased overall in November to their highest level since May 2023, there were further signs of what economists have described as a "no hire, no fire" stasis in the labor market.
In the November Job Openings and Labor Turnover Survey (JOLTS) report released on Tuesday, the hiring rate fell to 3.3% from the 3.4% seen in October. Meanwhile, the quits rate, a sign of confidence among workers, fell to 1.9% from 2.1% in October. Both metrics are now lower than they were before the onset of the pandemic in March 2020.
"Labor markets keep cooling," Renaissance Macro head of economics Neil Dutta wrote in a note to clients on Wednesday. "As we noted yesterday, there is more signal from the quits rate than openings."
ADP's Richardson noted right now the cooling of the labor market is playing out on the edges. White-collar workers are taking longer to find jobs, Richardson said. An increasing number of hourly workers are seeing their hours cut to the point where their yearly wages aren't outpacing inflation.
But things could flip the other way too, Richardson said, pointing to three straight monthly declines in manufacturing jobs where interest rate cuts could potentially help reinvigorate the sector.
"I don't think we say stable," Richardson said. "Economies are known to change very quickly."
The Federal Reserve remains attentive to this dynamic. Fed Chair Jerome Powell said in a press conference on Dec. 18 that the labor market is "looser than pre-pandemic." But he also highlighted that, for now, the labor market is cooling in a "gradual and orderly way."
After an extended period of waiting for the labor market to come off the boil as the central bank raised interest rates to fight against inflation, this puts its labor market goals clearly in one direction.
"We don’t think we need further cooling in the labor market to get inflation down to 2%," Powell said.
A broader update on the state of the jobs market in the US will come on Friday with the December jobs report. Consensus expects the US economy added 163,000 jobs in December, down from the 227,000 additions seen in November. Meanwhile, the unemployment rate is projected to hold steady at 4.2%.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer .