WASHINGTON, July 31 (Xinhua) -- The U.S. private sector added 122,000 jobs in July, with job creation edging down and pay gains continuing to slow, indicating a slowing labor market, according to a report released Wednesday.

The latest data were announced by Automatic Data Processing (ADP) and Moody's Analytics in a National Employment Report based on a monthly survey.

The survey showed that large companies hired 62,000 employees, and medium companies hired 70,000, while small companies -- those with fewer than 50 employees -- laid off 7,000 workers.

Year-over-year pay gains for job stayers slowed to 4.8 percent in July, the slowest pace of growth in three years, the survey showed. Job switchers saw a big drop, with pay gains slowing to 7.2 percent from 7.7 percent.

"With wage growth abating, the labor market is playing along with the Federal Reserve's effort to slow inflation," said Nela Richardson, chief economist at ADP. "If inflation goes back up, it won't be because of labor," Richardson added.

The Fed has maintained its policy rate between 5.25 percent and 5.50 percent over the past year. It is anticipated rates will remain unchanged at the conclusion of the July 30-31 policy meeting, paving the way for a potential rate cut in September.

The ADP report came two days before the crucial monthly employment report released by the Labor Department's Bureau of Labor Statistics, which will include employment data from both the private sector and the government.