US private sector hiring and wage growth slowed in December 2024, indicating an ongoing moderation in demand for workers.

Employment rose by 122,000 last month — the least in four months — following a 146,000 increase in November, according to ADP Research Institute data published Wednesday. The median projection in a Bloomberg survey of economists called for a rise of 140,000.

The report showed employment growth was mixed across industries. Education and health services, construction, and leisure and hospitality registered the biggest increases. Manufacturing, natural resources and mining as well as professional and business services saw declines in headcount.

Wednesday’s figures suggest the gradual softening in the US labor market in 2024 extended through the end of the year. Federal Reserve officials will have to balance that trend against renewed inflation fears in deciding how far to continue cutting interest rates in 2025 and beyond.

“The labor market downshifted to a more modest pace of growth in the final month of 2024, with a slowdown in both hiring and pay gains,” said Nela Richardson, chief economist at ADP.

The ADP report, published in collaboration with Stanford Digital Economy Lab, showed wage growth cooled further. Workers who changed jobs saw a 7.1% increase in pay, while those who stayed put saw a 4.6% gain, the slowest since mid-2021. ADP bases its findings on payrolls covering more than 25 million US private sector employees.

The West was the biggest driver of job gains by region, while companies with at least 500 employees accounted for the vast majority of job creation last month.

Separate data published Wednesday by the Labor Department showed initial filings for unemployment insurance fell to 201,000 in the week through Jan. 4, the lowest since February 2024. Meanwhile, recurring applications in the previous week climbed to 1.87 million. The data can be choppy from week to week, especially around the holidays.

The government’s monthly employment report due Friday is projected to show payrolls, including government positions, rose by 163,000 in December following a 227,000 increase in November.

(With assistance from Chris Middleton, Cécile Daurat and Maria Clara Cobo.)