Private payrolls were much stronger than expected last month, as the ADP Employment Report showed that there were 497,000 jobs created in June. Annual pay for job stayers increased 6.4% and job changers saw an average increase of 11.2%. While these pay gains are still high, they have been declining over the last year.

Leisure and hospitality once again led the way with 232,000 job gains, which was more than double the growth reported in any other industry sector. Construction followed with 97,000 new jobs, reflecting the growing confidence among home builders as they’ve ramped up production to meet buyer demand.

What’s the bottom line? The high level of leisure and hospitality job gains may not continue to bolster the overall private payroll total for much longer. We have now eclipsed pre-Covid levels with 16.7 million employees in this sector versus 16.2 million in April 2019. Plus, the BLS Jobs Report only showed 21,000 leisure and hospitality job gains in June, while the latest Job Openings and Labor Turnover (JOLTS) report showed a sizable drop (108,000) in leisure and hospitality job openings. The data combined suggests softer job growth in this area to come.

Nela Richardson, chief economist for ADP, added, “Consumer-facing service industries had a strong June, aligning to push job creation higher than expected. But wage growth continues to ebb in these same industries, and hiring likely is cresting after a late-cycle surge.”