Private Sector Hiring Accelerates in September, ADP Report Shows

The U.S. labor market demonstrated continued strength in September, with private sector hiring exceeding expectations. Payroll processing firm ADP reported on Wednesday that private companies added 143,000 jobs for the month, surpassing economists’ forecasts of 128,000. This acceleration in hiring, up from an upwardly revised 103,000 jobs in August, suggests that the labor market remains resilient despite some signs of a broader economic slowdown.

However, the pace of wage growth continued to moderate. The annual pay increase for workers staying in their jobs eased to 4.7%, while the 12-month gain for job switchers declined to 6.6%, down 0.7 percentage point from August.

The leisure and hospitality sector led the way in job creation, adding 34,000 jobs in September. Other sectors experiencing significant gains include construction (26,000 jobs), education and health services (24,000 jobs), professional and business services (20,000 jobs), and other services (17,000 jobs).

The only sector to experience a decline in employment was information services, which lost 10,000 jobs.

All of the job growth came from larger companies with more than 50 employees. Smaller businesses, particularly those with fewer than 20 employees, experienced a decline in employment.

The ADP report comes ahead of the Labor Department’s more comprehensive nonfarm payrolls report, expected on Friday. While the ADP data can provide insights into the labor market’s direction, the two reports can sometimes differ significantly.

The Federal Reserve is closely monitoring labor market data as it weighs its next interest rate decisions. Federal Reserve Chair Jerome Powell recently described the labor market as “solid” but acknowledged that it has “clearly cooled” over the past year.

The Fed is expected to continue lowering interest rates in the coming months, with market expectations currently favoring a quarter-point cut in November followed by a half-point reduction in December. However, Powell has suggested that two consecutive quarter-point cuts are more likely, emphasizing that the Fed will remain data-dependent and adjust its policy accordingly.

Key Takeaways:

• Private sector hiring accelerated in September, exceeding expectations and suggesting continued labor market strength.
• Wage growth continued to moderate, potentially easing inflationary pressures.
• The leisure and hospitality sector led job creation, while information services experienced job losses.
• The ADP report comes ahead of the Labor Department’s more comprehensive nonfarm payrolls report on Friday.
• The Federal Reserve is closely watching labor market data as it weighs its next interest rate decisions.

The September ADP report provides encouraging signs of a resilient labor market, which could support continued economic growth. However, the Fed remains focused on managing inflation and will likely proceed cautiously with further interest rate cuts, carefully assessing the impact of its policies on both inflation and employment.