Small businesses added 74,000 jobs to the U.S. economy in December as pre-pandemic norms continued to return to the labor market in the final weeks of 2023.
In total, businesses added 164,000 employees in December and ended the year with an annual wage growth of 5.4%, according to a joint report from human relations and payroll firm ADP and the Stanford Digital Economy Lab. December was the fourth month in a row that the labor market improved, driven by modest increases in hiring among hospitality and leisure small businesses. Most business sizes contributed to the gain, with companies comprised of 19 or fewer employees contributing the second most (54,000) and companies the size of 50 to 249 employees contributing the most (58,000). The only enterprises to see job losses were mid-size businesses with team sizes of 250 to 499 members, whose workforces shrank by roughly 5,000.
These numbers reflect pre-pandemic economic trends, according to ADP Chief Economist Nela Richardson. “We’re returning to a labor market that’s very much aligned with pre-pandemic hiring,” she commented. “While wages didn’t drive the recent bout of inflation, now that pay growth has retreated, any risk of a wage-price spiral has all but disappeared.”
In the early days of the COVID pandemic, private-sector hiring slowed to a crawl as the economy lost millions of jobs due to shutdowns in multiple industries. The labor market first showed signs of improvement in the latter half of 2020 and has continued to see steady year-over-year improvements since. A key concern for analysts was that salaries would rise at an unsustainable speed, leading to even more out-of-control inflation and a likely recession. However, while consumer prices rose sharply in the years following the pandemic, wage growth remained modest and eventually began to stagnate, disadvantaging working professionals but saving the economy from a “hard-landing” scenario.