ADP reported on Wednesday that private sector employment growth in October was slightly higher than expected, offering some hope that the labor market is not in danger of sinking.
Companies added 42,000 jobs during the month, a gain of 22,000 jobs that followed a decline of 29,000 in September and exceeded the Dow Jones consensus estimate. According to the payroll company, the revised figures for September reduced the number of jobs lost by 3,000.
The trade, transport and public works sector added 47,000 jobs, offsetting losses in several other sectors. Education and health services also showed an increase of 26,000 cases, and financial activities increased by 11,000 cases.
Despite a technology boom powered by artificial intelligence, the number of positions in the information services sector fell by 17,000. Other sectors posting losses included professional and business services (-15,000), other services (-13,000) and manufacturing (-3,000), which continue to struggle despite President Donald Trump’s tariffs aimed at bringing factory jobs back to the United States.
All job creation came from businesses employing at least 250 workers. While this category gained 76,000 jobs, small businesses lost 34,000 jobs. Nella Richardson, chief economist at ADP, said the trend away from small business employment growth was significant, given that small businesses account for three out of four jobs.
“While big companies are grabbing the headlines, small businesses are driving jobs,” Richardson said on CNBC. “So weakness at the small business level remains a concern and I think that’s one of the reasons why the recovery has been so slow.”
Even though employment growth was modest, salaries continued to rise. Wages for those who stayed in their jobs increased by 4.5% compared to the same month last year, the same as in September, while wages for those who changed jobs increased by 6.7% compared to the same month last year, a slight increase from the previous month.
“Private employers added jobs in October for the first time since July, but hiring was modest compared to previous years.”
“This is consistent with what we reported earlier this year. Meanwhile, wage growth has remained broadly flat for over a year, indicating that changes in demand and supply are in balance,” Mr Richardson said.
According to data compiled by ADP, employment growth is averaging about 60,000 people per month. However, that momentum slowed significantly in the second half of this year.
ADP statistics are released on the first Wednesday of each month and take a backseat to the Bureau of Labor Statistics’ official nonfarm payrolls report, which is typically released two days later. However, due to the historic government shutdown, BLS, like all other government agencies, stopped collecting and publishing data.
Had the BLS report been released, Wall Street expected payrolls to fall by 60,000 and the unemployment rate to rise to 4.5%.
Fed officials expressed concern about the state of the labor market and said the central bank’s interest in keeping inflation above its 2% target has so far been outpaced. The Fed approved a quarter-point cut in its key interest rate at its meeting last week, and its current interest rate target is between 3.75% and 4%.
Although the BLS remains clouded, officials plan to examine other data this week.
Challenger, Gray & Christmas will release its monthly survey of announced layoffs Thursday, but economists will look to state-level unemployment claims to see whether companies are cutting jobs. The University of Michigan also plans to release its monthly sentiment index on Friday, which shows how consumers feel about the broader economic situation. In fact, the number of job openings is at its lowest since February 2021, according to recent data from job sites.
