Private sector employment increased by 38,000 jobs in August, according to ADP’s latest report, marking a slowdown from July’s upward revised figure of 46,000 and falling short of the projected 47,000. This represents the smallest job growth since January and suggests a cooling in the labor market as the pace of hiring decelerates across multiple industries. The report highlights that most of the expansion came from a handful of sectors, while others experienced notable declines in employment.

The education and health services sector led job creation with an addition of 45,000 workers, driven largely by health services. Leisure and hospitality contributed 16,000 new jobs, and construction expanded by 12,000. On the other hand, the manufacturing sector suffered a significant setback, shedding 17,000 positions. Additionally, professional and business services cut 16,000 jobs, while natural resources and mining, as well as trade, transportation, and utilities, each saw employment fall by 5,000.

The bulk of employment gains in August were driven by large companies, with those employing 500 or more workers adding 34,000 jobs. Small businesses, specifically those with fewer than 50 employees, recorded a much smaller increase of 3,000 jobs. ADP’s report also revealed that wage growth remained steady: base pay rose by 3% year-over-year, while gross pay, which includes bonuses, commissions, and tips, increased by 4.4%, mirrors the levels observed in July.

This ADP data serves as a preliminary indicator before the Bureau of Labor Statistics’ nonfarm payroll numbers are released on Friday. Economists forecast nonfarm payrolls to increase by 53,000 in August, rebounding from a July decrease of 23,000 jobs. The unemployment rate is expected to hold steady at 4.1%, signaling that despite softer job gains, the labor market maintains strength as the economy navigates cooling growth.