Private payrolls in the US took a significant hit in September, adding complexity to an already uncertain economic landscape. With the government shutdown halting the release of the Bureau of Labor Statistics’ (BLS) monthly jobs report, policymakers and investors are left grappling for insights into the labor market’s health. In the absence of official data, attention has turned to alternative sources, such as the private-sector jobs report from payroll processor ADP, released on October 1.
According to ADP, US private-sector businesses shed 32,000 jobs in September, a stark contrast to economists’ expectations of a 50,000-job gain. The report also revised August’s figures, turning an initial estimate of 54,000 jobs added into a loss of 3,000. ADP’s chief economist, Nela Richardson, attributed much of this downturn to a preliminary “rebenchmarking” of the data, which reduced September’s job count by 43,000 compared to pre-benchmarked figures. “While the numbers changed, the story remains consistent: hiring momentum has slowed throughout 2024,” Richardson told reporters. She noted that the recalibration, aligned with the 2024 Quarterly Census of Employment and Wages (QCEW), revealed a persistent slowdown in hiring, particularly evident in September. The QCEW, which draws from quarterly tax reports submitted by businesses, offers a comprehensive view of employment and wages at state, regional, and county levels. However, its lagged data limits its timeliness, leaving gaps in real-time analysis.
September’s job losses were driven primarily by small businesses, with widespread declines across industries. Professional and business services, as well as leisure and hospitality, saw some of the largest drops. Health care remained a notable exception, continuing to drive consistent employment growth throughout the year. The broader labor market is showing signs of stagnation. The BLS’s August jobs report, the last available before the shutdown, indicated that the economy added just 22,000 jobs, with the unemployment rate climbing to 4.3%—its highest in nearly four years. June’s job gains were also revised downward into negative territory. The BLS’s Job Openings and Labor Turnover Survey, released earlier this week, further underscored the slowdown, with the hiring rate dropping to 3.2% in August, matching its lowest level since 2013, excluding the early pandemic period in 2020.
Despite the lack of a monthly BLS jobs report, economists argue that the Federal Reserve has enough evidence to justify further interest rate cuts at its next meeting. Joe Brusuelas, an economist at RSM US, noted that the labor market’s condition supports a quarter-point rate reduction. He highlighted additional pressures, including policy uncertainty around trade and immigration, as well as long-term demographic challenges limiting labor supply. “The government shutdown and threats of mass firings are not conducive to a positive October payroll outlook,” Brusuelas wrote. US stocks reflected this uncertainty, trending lower amid concerns over the shutdown and remaining subdued after the ADP report’s release.
While ADP’s data is not always a reliable predictor of the BLS’s official numbers, it remains a key indicator of labor market trends, particularly in the current data vacuum. Economists had anticipated a rebound in September, with forecasts of 50,000 jobs added and a steady unemployment rate of 4.3%. However, the ADP report paints a bleaker picture, reinforcing concerns that the US labor market is at risk of stalling.
As the government shutdown persists, the absence of comprehensive data will continue to challenge policymakers and investors alike, making reports like ADP’s a critical, if imperfect, tool for navigating the economic landscape.
