September’s Private Payrolls Surge with 89,000 Jobs: A Surprising Disappointment

Private payroll growth in September experienced a significant decline, as reported by ADP on Wednesday. This report offers an alternative perspective to other indicators suggesting a robust labor market.

The payroll processing firm stated that job growth only amounted to 89,000 for the month, a decrease from the upwardly revised 180,000 in August. This figure falls below the estimated 160,000 provided by economists surveyed by Dow Jones.

Of greater significance, however, is the indication that the historically tight labor market may be loosening, which could give the Federal Reserve a reason to halt interest rate hikes. ADP also reported a slowdown in annual wage growth to 5.9%, marking the 12th consecutive monthly decline.

It is important to note that the ADP numbers often differ from the government’s official count, which will be released on Friday. According to economists, non-farm payrolls are projected to have increased by 170,000 in September, a decline from the 187,000 increase in August.

Service industries accounted for the majority of job gains, contributing 81,000 to the total figure. Among these, the leisure and hospitality sector added 92,000 jobs.

Other sectors experiencing growth included financial activities (17,000), construction (16,000), and education and health services (10,000). However, these gains were offset by losses in professional and business services (32,000), trade, transportation, and utilities (13,000), and manufacturing (12,000).

“This month, we are observing a significant decline in the number of jobs,” said Nela Richardson, chief economist at ADP. “Additionally, we have witnessed a steady decrease in wages over the past 12 months.”

Yesterday, the Labor Department reported an unexpected rise in job openings in August, causing concerns in the financial markets and exacerbating fears that the Federal Reserve will maintain restrictive monetary policies to control inflation.

However, the number of unemployed individuals has also increased significantly, bringing down the job openings-to-available workers ratio to 1.5 to 1, whereas it had previously been as high as 2 to 1.

ADP highlighted that job growth was strongest in companies with fewer than 50 employees, contributing 95,000 positions. Medium-sized companies added 72,000 jobs, while those with 500 or more employees reported a loss of 83,000.