Private companies added just 42,000 jobs October, payroll processor ADP said Wednesday, a fresh datapoint that highlights continued tightness in the labor market but one that is better than some previous months.
The ADP report, which does not include public sector workers and only covers employment at private companies, is one of the few data points available as the government shutdown drags on.
That impasse has led to the temporary closure of the Bureau of Labor Statistics, which still has not released last month’s jobs report and likely won’t release the jobs report that would have normally been released on Friday.
The official national unemployment rate has steadily ticked up this year, from 4% in January to 4.3% in August, as hiring has slowed. The most recent jobs report from the Bureau of Labor Statistics showed that only 22,000 jobs were added in August, and that was after it revised down hiring in June and July by thousands. The BLS said in June the labor market was in contraction, with 13,000 roles being shed.
“Private employers added jobs in October for the first time since July, but hiring was modest relative to what we reported earlier this year,” ADP’s chief economist Nela Richardson said in a statement.
Richardson added that "pay growth has been largely flat for more than a year, indicating that shifts in supply and demand are balanced."
"Year-over-year pay growth was flat in October from the month prior, at 4.5 percent for job-stayers and 6.7 percent for job-changers," ADP wrote in its report.
Analysts surveyed by Dow Jones expected the ADP report to show that 22,000 jobs were added in October, a sharp reversal from the 32,000 jobs shed in September. However ADP said Wednesday that September's job losses were revised up slightly to a loss of 29,000.
Job growth was driven primarily by companies classified as "trade/transportation/utilities" firms and those in the education and health services fields.
Manufacturing firms lost 3,000 jobs in the month and construction firms added 5,000 roles, ADP said.
"I think if I were to point out the most concerning trend, [it] would be that drop in leisure and hospitality, because that points swiftly back to the consumer and how healthy and resilient the consumer will be," Richardson told reporters on a call after today's report was released. Leisure and hospitality firms lost 6,000 jobs in the month.
"We've seen consumer resiliency push up employment in that sector. And so this negative number is something to watch as we go into the holiday season."
Large companies with more than 500 employees added 73,000 jobs while firms classified by ADP as medium and small shed the most number of jobs.
"Three in four workers in the United States, approximately, work in a smaller firm with headcount under 250 so seeing weakness and softness there is a concern when you think of the U.S. labor force population in its entirety," Richardson said.
"So while we're seeing a lot of headlines from large companies, it's really the small companies that are driving hiring over the long term."
ADP’s employment report also comes as major companies such as Amazon, UPS, Target, Microsoft, Paramount and General Motors eliminate tens of thousands of jobs.
On Tuesday, IBM became the latest blue chip technology company to announce thousands of job cuts.
By the time the government reopens, there will be a swath of delayed reports such as the Consumer Price Index and Producer Price Index. Other critical reports such as data about the country’s GDP and the Fed’s preferred inflation measure — the Personal Consumption Expenditures Price Index — have also been delayed by the shutdown.
That lack of fresh data has caused policymakers, businesses and economists to turn to alternative sources of data such as the ADP report. However, most agree that there is no substitute for official government data, due to the number of people that are required to survey businesses and households for employment and price information and compile the reports.
Another non-government source of data, Indeed’s job postings index fell on Tuesday to the lowest level since February 2021. Indeed also noted a slump in wages, which fell 0.8% from a year ago.
“This is a temporary state of affairs,” Federal Reserve Chair Jerome Powell said on Oct. 29. “We’re going to collect every scrap of data we can find, evaluate it, and think carefully about it.”
“If the shutdown ends next week, we think the Fed will have a good amount of data by the time of the December meeting,” Morgan Stanley analysts wrote on Monday.
But the longer the shutdown goes on for, the more data that can be missed.
“If the shutdown lasts into mid-November, data would be more limited,” Morgan Stanley’s analysts added.
“What do you do if you’re driving in the fog,” Powell said. “You slow down.”
