ADP Report: Private Sector Adds 143K Jobs in September, Surpassing Expectations

Private Sector Job Growth Beats Expectations in September

Private employers added 143,000 jobs in September, surpassing the forecast of 124,000 jobs, according to the latest ADP National Employment Report. This marks a positive rebound after a five-month slowdown in hiring, providing a hopeful sign for the U.S. labor market as job growth expands across several key sectors.

Job Gains Across Most Sectors

The report highlighted widespread job creation across industries, with only the information sector experiencing losses. Notably, the manufacturing sector added 2,000 jobs, its first increase since April, while the service-providing industries led overall growth with 101,000 new positions. This included gains in leisure and hospitality (34,000 jobs), professional and business services (20,000 jobs), and education and health services (24,000 jobs).

• Goods-producing sectors: Added 42,000 jobs, led by construction with 26,000 new positions.
• Service-providing sectors: Contributed 101,000 jobs, with leisure/hospitality and education/health services as top performers.
• Regional distribution: The South saw the largest regional gains, adding 61,000 jobs, followed by the Northeast with 32,000, and the Midwest with 26,000.

Pay Growth Slows Despite Job Growth

Despite the stronger job growth, wage increases have cooled slightly. The ADP report indicated that year-over-year pay growth for job-stayers dropped to 4.7%, while job-changers saw a sharper decline, with pay gains falling from 7.3% in August to 6.6% in September. This suggests that while employers are adding more jobs, they are not increasing wages as aggressively, likely reflecting a cautious approach amidst uncertain economic conditions.

• Job-stayers’ median pay increase: 4.7%
• Job-changers’ median pay increase: 6.6%
• Pay growth by firm size: Small firms (1-19 employees) saw the smallest wage increases (4.0%), while medium and large firms offered higher gains, around 4.7-5.0%.

Regional and Firm Size Insights

Large establishments (500+ employees) led the hiring surge, adding 86,000 jobs in September. Medium-sized businesses also contributed significantly, with 64,000 jobs, while small businesses struggled, shedding 8,000 jobs overall. By region, the West and South led in job creation, particularly in the West South Central region, which added 43,000 jobs.

• Small establishments (1-49 employees): A net loss of 8,000 jobs.
• Medium establishments (50-499 employees): Gained 64,000 jobs.
• Large establishments (500+ employees): Contributed 86,000 jobs.

Market Forecast: Bullish on Job Growth, Cautious on Wages

The stronger-than-expected job growth across various sectors signals a bullish outlook for the U.S. labor market, especially in service-oriented industries. However, the slowdown in wage growth could limit consumer spending, potentially curbing economic expansion in the coming months. Traders should expect continued volatility, particularly in sectors sensitive to wage changes and employment trends. If job growth remains steady while wages lag, inflationary pressures could ease, but the risk of slower economic growth may loom.

In the short term, the labor market shows signs of resilience, but a cautious stance on wage growth suggests employers are preparing for potential economic uncertainty.