ADP jobs report December 2022:

The labor market ended 2022 on a high, with companies adding far more positions than expected in December, payroll processing firm ADP reported Thursday.

Private payrolls rose by 235,000 for the month, well ahead of the Dow Jones estimate of 153,000 and the 127,000 initially reported for November.

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While the goods manufacturing sector grew by a relatively meager 22,000, service providers added 213,000, led by leisure and hospitality, which added 123,000 positions. Professional and business services increased by 52,000, while education and health services increased by 42,000.

Stock market futures edged lower after the report as investors fear the strong jobs numbers could prompt the Federal Reserve to keep raising interest rates.

The big jobs surprise comes despite the Federal Reserve’s efforts to slow a surging labor market that has helped push inflation near its highest level in more than 40 years.

The central bank raised interest rates seven times in 2022, reaching 4.25 percentage points, and officials have identified labor market imbalances as a key area they want to target. There are still about 1.7 jobs for every worker available, a condition that has led to an increase in wages that has yet to keep pace with the rise in the cost of living.

ADP reported that annual wages across all categories rose 7.3% from a year earlier, led by a 10.1% increase in the core leisure and hospitality industry.

“The labor market is strong but fragmented, with hiring varying significantly by industry and company size,” said ADP Chief Economist Nela Richardson. “Business segments that hired aggressively in the first half of 2022 have slowed hiring and in some cases cut jobs in the final month of the year.”

Trade, transport and utilities saw a job loss of 24,000 in the month, while natural resources and mining fell by 14,000 and financial activities fell by 12,000. Other notable gainers by sector included professional and business services (52,000), education and health services (42,000) and construction (41,000).

Job gains were evenly distributed among small and medium-sized businesses, which together added 386,000 workers. Companies with more than 500 employees reported a decline of 151,000.

The job gains edge narrows in a year in which wage growth averaged about 300,000 per month, according to ADP data, which can differ significantly from the Labor Department’s official nonfarm payrolls number.

This increase has come despite an economy that saw negative growth in the first two quarters – a widely accepted definition of a recession – and aggressive tightening by the Fed. At their December meeting, central bank policymakers said they plan to keep raising rates and don’t foresee any cuts until at least 2023, according to minutes released Wednesday.

The ADP report comes a day ahead of the Labor Department’s count, which is expected to show an increase of 200,000 in non-farm payrolls and an unemployment rate holding steady at 3.7%. Nonfarm payrolls rose by 263,000 in November, which was much larger than the GDP total.