December private payrolls rose by 807,000, far exceeding expectations: ADP

U.S. private employers added jobs at a much faster-than-anticipated rate in December, helping to alleviate some worker shortages as the tight U.S. labor market persisted.

The U.S. economy saw 807,000 private payrolls return in the final month of 2021, ADP said in its closely watched report on Wednesday. This compared to the 410,000 job gains consensus economists anticipated, based on Bloomberg data. Employers had brought back 505,000 jobs in November, according to ADP's revised estimate for that month.

Job growth in leisure and hospitality industries contributed nearly one-third of the total payroll gains in December, with the sectors hardest hit by the pandemic making some of the biggest strides in recovering. These employers brought back 246,000 workers in December. In other areas of the service economy, job growth was also significant in December. Trade, transportation and utilities employers brought back 138,000 payrolls, while professional and business services employment grew by 130,000.

In the goods-producing sector, both construction and manufacturing employers saw job growth accelerate compared to November. Jobs grew by 62,000 and 74,000, respectively, for these industries during December.

Over the course of 2021, employers added back payrolls at a rate above historical trends, based on data from both ADP and the U.S. Labor Department, with the labor market regaining some lost ground after 2020's swift but severe recession amid the pandemic.

As many as 882,000 private payrolls came back in a single month in 2021 in May, ADP's data showed. But the rate of hiring has slowed in the months since, following an initial surge in hiring after vaccinations picked up in the U.S. last spring and stay-in-place orders eased.

ADP's December report comes amid a slew of other data pointing to the tight labor market heading into the new year. And in the past month, concerns over soaring Omicron case counts have compounded with existing pressures on the labor market, making it even more difficult for workers to return and employers to find staff.

Job openings stood at a near-record of more than 10.5 million in the U.S. in November, based on the Labor Department's latest count. Churn within the labor market has also been elevated, as a record 4.5 million people quit their jobs in November. And given the discovery of the first Omicron case in the U.S. in late November, many economists expect to see additional virus-related impacts to the labor market meaningfully appear in the monthly jobs data for January.

"With labor market conditions already exceptionally tight, employment growth will continue to slow over the course of 2022 unless the labour force begins to rise more markedly," Michael Pearce, senior U.S. economist for Capital Economics, wrote in a note Tuesday. "Renewed virus concerns and a new wave of school closures will keep some potential workers on the side lines while the widening net of vaccine mandates will, in the short term at least, further constrain labour supply."

Coming two days before the Labor Department's jobs report, the ADP report serves as one measure setting expectations for the "official" government jobs report. However, ADP's print during the pandemic especially has served as an imperfect indicator of what to expect from the Labor Department's reports. In three of the past four months, ADP's print overshot the Labor Department's payrolls figure, which last came in at a disappointing 210,000 for November.

Consensus economists expect to see the Labor Department report non-farm payroll gains of 424,000 for the final month of the year, more than doubling November's count. The unemployment rate is expected to tick lower to 4.1% from November's 4.2%, albeit while remaining above the 50-year low of 3.5% from February 2020.

The Labor Department's December jobs report is set for release Friday at 8:30 a.m. ET.

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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck