Sharp Decline Amid Shutdown
Private payrolls fell by 32,000 in September, marking the steepest decline in two and a half years, according to payrolls processor ADP. Economists had forecast a gain of 45,000, making the contraction particularly stark. August figures were also revised downward to show a loss of 3,000 jobs instead of the previously reported 54,000 gain. The weak labor data comes as the U.S. government shutdown delays official Bureau of Labor Statistics reports, heightening reliance on ADP’s estimates for labor market insights.
Sector Losses and Gains
Job cuts were spread across multiple industries. Leisure and hospitality shed 19,000 positions, reflecting the end of summer travel season, while other services lost 16,000 and professional and business services declined by 13,000. Trade, transportation and utilities fell by 7,000, and construction contracted by 5,000. In contrast, education and health services added 33,000 positions, driven by back-to-school hiring and steady healthcare demand. Overall, service providers dropped 28,000 jobs and goods-producing sectors were down 3,000.
Business Size Trends
Small businesses were hit hardest, with firms employing fewer than 50 workers shedding 40,000 jobs. Larger corporations fared better, as companies with more than 500 employees added 33,000 positions. Mid-sized firms showed little net change. The uneven distribution underscores how smaller businesses continue to face sharper headwinds, particularly in consumer-facing industries, while larger firms retain more stability.
Fed Policy and Economic Outlook
The Federal Reserve, which meets at the end of October, may weigh the latest labor data more heavily given the absence of government payroll figures. Markets anticipate another quarter-point interest rate cut. Boston Fed President Susan Collins acknowledged growing risks, warning that labor demand may weaken further, potentially pushing unemployment above its current 4.3%. Despite these risks, the economy remains resilient, with GDP expanding 3.8% in the second quarter and projected to grow 3.9% in the third, according to the Atlanta Fed’s GDPNow tracker.
Wage Growth Slows for Job Changers
Despite hiring softness, wages continued to grow. Annual pay rose 4.5% overall in September, steady from August. However, wage growth for job changers slowed to 6.6%, down from 7.1% the previous month. ADP noted that benchmark revisions from the Bureau of Labor Statistics also affected September’s figures, emphasizing an ongoing narrative of weakening labor momentum. While the overall picture shows resilience in growth, the combination of shrinking payrolls and slower wage gains suggests mounting pressure on the labor market.