U.S Private payrolls showed continued resilience in the labor market last month, adding 164,000 jobs.

In December, private employers in the U.S. added more jobs than expected. The labor market’s resilience suggests that the Fed may have to take a more cautious approach when it comes to reducing interest rates.

According to data from payroll processor ADP, private-sector employment increased by 164,000 in December, which was higher than the 115,000 expected by economists.

According to data from ADP, the hospitality and leisure industries were the main drivers of the private sector’s gains. Despite the negative effects of higher interest rates, construction companies were still able to hire.

Meanwhile, average hourly earnings grew at a slower pace of 5.4% in December, down from 5.6% in the previous month. This deceleration in growth has been observed since September 2022.

On a separate note, the Labor Department reported that the number of people who resigned from their jobs in November reached its lowest level since November 2021. This could help lower wage growth and prevent the inflation rate from rising. Job openings also decreased to their lowest level in almost three years.

The data from ADP is released before the official non-farm payrolls report, which is scheduled to be released on Friday. It is expected to provide a deeper insight into the labor market’s health. The Fed has been closely monitoring the labor market’s cooling trend, which could help alleviate some of the pressure on inflation. Market participants are also eyeing signs of a slackening in the price gains in the US, which could convince the central bank to start reducing its rate increases.

Expectations about the Fed’s next move grew after the central bank unveiled a dovish outlook during its December meeting. However, minutes from the meeting indicated that policymakers were not convinced that the economy was improving.

According to the minutes of the meeting, the policymakers believed that the US economy was close to its peak, but they noted that the level of uncertainty surrounding the country’s economy was still elevated. They also noted that further evidence was needed to show that inflation was moving toward their 2% objective.