ADP Data Reveals Sluggish Wage and Employment Gains in October

Highlights

• 113,000 jobs added, below 130,000 forecast.
• Wage growth hits one-year low at 5.7%.
• Mid-sized firms contribute most, adding 78,000 jobs.

U.S. Private Sector Employment Below Expectations in October

October saw modest growth in private sector payrolls, falling short of market expectations, according to data released by ADP. The payroll processing firm reported an addition of 113,000 jobs, an increase from September’s 89,000 but significantly lower than the Dow Jones consensus forecast of 130,000. This development could signal a potential slowdown in the employment sector.

Pay and Sectoral Analysis

Wage growth was also less than stellar, registering a year-over-year increase of just 5.7%, the lowest since October 2021. The breakdown by sectors revealed a more nuanced story. Education and health services led job creation with 45,000 new positions, followed by trade, transportation, and utilities, which added 35,000 jobs. Financial activities and leisure and hospitality were not far behind, contributing 21,000 and 17,000 new jobs, respectively.

Mid-sized Firms Take the Lead

Interestingly, the bulk of the employment gains came from firms with 50-499 employees, which collectively added 78,000 jobs. Almost all the added jobs were in services-providing industries; goods producers made a marginal contribution of just 6,000 jobs. ADP chief economist Nela Richardson noted, “No single industry dominated hiring this month,” emphasizing that the era of large post-pandemic pay increases seems to be waning.

Upcoming Government Data

The ADP report sets the stage for the Labor Department’s upcoming nonfarm payrolls data, expected to show a gain of 170,000 jobs. It’s worth noting that these government figures, which include public sector jobs, have historically differed from ADP’s counts. In September, for instance, the Labor Department reported a staggering 336,000 job gains, more than tripling the ADP estimate.

Short-term Outlook: Cautiously Bearish

Given the miss on job expectations and the slowing pace of wage growth, the short-term outlook for the employment market appears cautiously bearish. Despite the slowdown, Richardson maintains that job growth rates are “still enough to support strong consumer spending.” Market participants should keep a close eye on the official government data for a more comprehensive view of the labor market.