Job creation tailed off significantly in December, pointing to an increasingly tight labor market where major gains ahead could be difficult to achieve, according to a report Thursday from ADP and Moody's Analytics.
The monthly tally for private job creation showed companies added 153,000 in the month after Donald Trump captured the presidency. That was considerably below market expectations of 170,000 and well below the 215,000 added in November. It also came amid expectations for significantly stronger growth under the new president.
"Job growth remains strong but is slowing," Mark Zandi, chief economist at Moody's Analytics, said in a statement. "The gap between employment growth in the service economy and losses on the goods side persists. Smaller companies are struggling to maintain payrolls while large companies are expanding at a healthy pace."
Indeed, businesses with fewer than 50 employees, the backbone of the jobs recovery since the Great Recession ended in 2009, added just 18,000 positions in December, with firms employing fewer than 20 employees actually cutting 3,000 jobs.
Companies with 50 to 599 employees added the most for the month at 71,000, while large firms contributed 63,000, all but 8,000 of which came from those with more than 1,000 workers.
Goods-producing companies had a particularly difficult month, cutting a net 16,000 jobs, which included a loss of 9,000 in the manufacturing sector. Natural resources and mining cut 5,000 while construction lost 2,000.
Services led the way with 169,000 new jobs, 82,000 of which came from trade, transportation and utilities. Education and health services added 29,000 while professional and business services contributed 24,000 and leisure and hospitality — essentially bars and restaurants — saw growth of 18,000.
The year concluded with an average of 174,000 jobs created per month, according to the ADP tallies, which usually differ significantly from the government's official nonfarm payrolls count. That was down from 209,000 in 2015 and comes as economists and Fed officials see a labor market with less slack. The unemployment rate has fallen to 4.6 percent even as job creation has slowed, a reflection both of a tightening market and more and more workers leaving the labor force.
The report comes a day ahead of the government's closely watched nonfarm payrolls report. Economists expect payroll growth of 172,500 for the month with a slight uptick in the jobless rate to 4.7 percent. The ADP report occasionally will cause economists to alter their estimates for the Labor Department count.
Also Thursday, a separate report showed first-time claims for state unemployment benefits fell more than expected to a near 43-year low, and a report by outplacement firm Challenger, Gray & Christmas said U.S.-based employers announced they would cut 33,627 jobs in December, up 25 percent from November's yearly low.