In accordance with ADP, personal payroll development slowed to 122,000 in July, lower than anticipated

Private employment growth continued to slow in July and wage gains fell to a three-year low, payroll company ADP said on Wednesday.

Companies created only 122,000 new jobs during the month, the slowest pace since January and below the upwardly revised figure of 155,000 in June. Economists surveyed by Dow Jones had expected an increase of 150,000.

ADP also reported that wages for those who stayed in their jobs rose 4.8% year over year, the smallest increase since July 2021 and a 0.1 percentage point decrease from June.

“As wage growth slows, the labor market is playing a role in the Federal Reserve's efforts to curb inflation,” said ADP chief economist Nela Richardson. “If inflation rises again, it will not be because of the labor market.”

Futures tied to major stock indices added to gains following the report, while U.S. Treasury yields fell.

There was more positive news on inflation on Wednesday, as the U.S. Department of Labor's Bureau of Labor Statistics reported that the labor cost index, an indicator closely watched by Fed officials, rose just 0.9 percent in the second quarter, according to seasonally adjusted figures.

This was below the 1.2% acceleration in the first quarter and the Dow Jones estimate of a 1% increase.

Both reports could increase the likelihood that the Fed will announce a September rate cut later in the day at the end of its two-day meeting.

Employment growth was concentrated in two sectors: trade, transport and utilities with 61,000 new workers and construction with 39,000. Other sectors with increases were leisure and hospitality (24,000), education and health (22,000) and other services (19,000).

Several sectors reported net losses during the month, including professional and business services (-37,000), information (-18,000) and manufacturing (-4,000). Firms with fewer than 50 employees also recorded losses, down 7,000 in July.

Geographically, employment growth was concentrated in the South, where 55,000 jobs were created, while the Midwest added only 17,000 jobs.

The ADP report comes two days before the U.S. Department of Labor's Bureau of Labor Statistics releases its nonfarm payrolls numbers, which, unlike the ADP count, include government jobs. The two reports can differ significantly, with ADP topping the BLS estimate of 136,000 private sector payrolls in June.

Economists expect employment to grow by 185,000 in July, down from 206,000 in June, with the unemployment rate remaining stable at 4.1%.

Correction: This story has been updated to correct the name of the Labor Department's Bureau of Labor Statistics.