ADP Report: Private Sector Employment Falters In September, Far Below Expectations Amid Interest Rate Pressures

The pace of monthly employment growth among private U.S. businesses continues to decelerate, marking its third consecutive month of declines in September.

Private employers added 89,000 new payrolls in September, down from 177,000 in August and falling short of the expected 153,000, as reported by Automatic Data Processing Inc. ADP on Wednesday.

This represents the slowest pace of monthly employment gains reported by ADP since January 2021, and significantly lower than the six-month average of 274,000 new monthly hires.

“Large establishments drove the slowdown, losing 83,000 jobs and wiping out gains they made in August,” the ADP National Employment Report wrote.

“We are seeing a steepening decline in jobs this month. Additionally, we are seeing a steady decline in wages in the past 12 months,” Nela Richardson, chief economist at ADP, added.

The ADP National Employment Report precedes the eagerly anticipated non-farm payrolls data, which is scheduled to be released by the Bureau of Labor Statistics, along with the unemployment rate and wage growth, this coming Friday.

ADP Employment Report: Key Highlights

• Goods-producing industries experienced a growth of 8,000 jobs in September, a decline from the 23,000 seen in August.
  
• Among goods-related industries, manufacturing showed shed 12,000 jobs, erasing the gains observed in August.
  
• Service-providing industries added 81,000 new hires in September, well below the 154,000 figure seen in August.
  
• Among service-related industries, professional and business services saw a 32,000 employment contraction in September, tumbling from the 15,000 gain seen in August.
  
• In September, employees who stayed in their existing positions saw their pay increase by 5.9% compared to the previous year, continuing a trend of diminishing growth for the 12th consecutive month. Meanwhile, for those who switched jobs, the rate of pay increase decreased to 9%, down from 9.7% in August.

Factors that may have played a role in the slowing pace of monthly employment include elevated interest rates, reduced demand for discretionary spending following the summer, and concerns about a potential U.S. government shutdown.

In September, the Federal Reserve kept interest rates unchanged at 5.25%-5.50% but hinted at the possibility of further increases and a commitment to keeping the cost of borrowing high for an extended period.

Congress averted a dramatic government shutdown that could have frozen public employee salaries and reduced a range of non-essential services. However, the shutdown was narrowly avoided at the very last minute, leaving many businesses in a state of uncertainty over the month.

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