Private Sector Job Growth Rose in December -- and Small Businesses Led the Way

Small business hiring ramped up at a time when large businesses cut their headcount.

For months on end, economists have been warning about a potential recession. And when we think of a recession, we tend to worry about job loss, since the two tend to go hand-in-hand.

But recent ADP data tells us that plenty of new jobs were added to the economy in December. And that's an encouraging piece of news.

The trend of job growth continues

Private employers added 235,000 jobs in December. But large-sized companies -- those with 500 employees or more -- actually shed 151,000 jobs in the course of the month. The reason for a net increase in private sector jobs was therefore due to strong hiring on the part of medium and small businesses.

In December, mid-sized companies with 50 to 249 employees added 159,000 jobs, while those with 250 to 499 employees added 32,000 new roles. All told, that's 191,000 new jobs from medium-sized businesses.

But small businesses did even more hiring. Those with one to 19 employees added 65,000 jobs in December, and those with 20 to 49 employees added 130,000 jobs. That's a whopping 195,000 jobs in total.

Which types of businesses added the most jobs?

The construction industry added 41,000 jobs in December. And that's actually encouraging, because there's been a major shortage of homes on the real estate market that's made things challenging for prospective buyers.

An uptick in construction jobs could signify that we're on the cusp of a surge of newly built homes. And that could open up the housing market significantly.

But the industry that added the most jobs in December is leisure and hospitality. An impressive 123,000 new jobs sprung up last month.

It's worth noting that the leisure and hospitality sector took a massive hit during the pandemic when travel was halted, and that unemployment numbers spiked in that industry in particular. The sector has been steadily adding jobs back over the past year or so, but a lot of those are replacement jobs for those lost in 2020. Still, given the way travel demand has been so strong since mid-2021, it's easy to see why this industry is now thriving -- and why it's been able to steadily introduce new employment opportunities.

One unexpected takeaway from December is that the trade, transportation, and utilities sector dumped 24,000 jobs. Given that these are essential services, that number is surprising. But it may be that companies within this sector are doing their best to cut costs in the face of the persistent recession warnings we've been hearing.

Good news all around

The fact that job growth rose in December is a positive sign given that so many experts have been sounding alarms about an impending economic downturn. Of course, a strong December doesn't mean we're out of the woods yet. But it's encouraging to see that hiring hasn't slowed down despite the strain of inflation, and despite the persistent warnings that things could get ugly pretty soon.