Private payrolls plunged in September, complicating the picture for the US economy
Private payrolls plunged in September, complicating the picture for the US economy as policymakers and investors struggle to assess the state of the labor market amid a government shutdown.
The Bureau of Labor Statistics is unlikely to release the monthly jobs report this Friday due to the closure. That means many flying blind without critical economic data are having to key into any information they can get, including Wednesday’s private sector jobs data from payroll company ADP.
US private-sector businesses lost 32,000 jobs in September, according to the report. August’s previously estimated 54,000 payroll gains were downwardly revised to negative 3,000.
Small private-sector businesses drove last month’s decline, and losses were widespread across industries (with some of the largest losses being in professional and business services and leisure and hospitality), ADP reported. The bulk of the hiring occurred at health care businesses.
However, ADP’s latest numbers come with some qualifications: A preliminary “rebenchmarking” of the data was a significant factor behind the negative August revision and September’s estimated job losses, ADP’s chief economist Nela Richardson said Wednesday.
“We found that once we benchmarked that data, it actually shows a September slowdown that has been consistent with what we’ve been reporting all year,” Richardson told reporters Wednesday. “In fact, though the numbers changed, the story and the narrative and the trend remain the same: Hiring momentum has slowed from the beginning of the year through September.”
Similar to the BLS’s two-step annual process, ADP recalibrates its estimates annually to the full-year 2024 Quarterly Census of Employment and Wages, which provides a comprehensive read on the number of businesses, employees and wages at the state, regional and county level because it derives that data from quarterly tax reports submitted by businesses to their states. However, it is heavily lagged.
A low-turnover environment
While ADP’s estimates don’t often correlate with the official monthly jobs numbers when they’re released days later — and have been frequently criticized by economists for having a poor track record in making short-term predictions — the report is still considered an indicator of the labor market’s trajectory.
And that outlook has been looking increasingly bleak. In addition to the private-sector job losses, the latest (and last-for-now) release from the BLS showed that the US labor market activity has grown increasingly stagnant.
Excluding the onset of the pandemic in early 2020, the hiring rate (hires as a percentage of total employment) fell in August to 3.2%, matching the lowest rate since 2013, according to the BLS’ Job Openings and Labor Turnover Survey report released Tuesday.
September’s estimated job gains, which ADP tabulated using anonymized and aggregated payroll data from its clients, came in well below economists’ expectations for 50,000 jobs added.
US stocks were broadly lower Wednesday in response to uncertainty around the government shutdown and remained at similar levels after the report was released: The Dow was down around 75 points, or 0.15%, at the opening bell. The S&P 500 fell 0.3% and the Nasdaq Composite slipped 0.4%. The 10-year Treasury yield moved lower as investors snapped up bonds.
