ADP tops estimates as job growth accelerates

The September ADP National Employment Report revealed that U.S. private sector employment increased by 143,000 jobs, surpassing the consensus estimate of 125,000. This was a notable acceleration from August's revised figure of 103,000, indicating that the labor market remains resilient despite recent economic uncertainty. The ADP report, which provides an independent snapshot of the labor market using payroll data from over 25 million employees, serves as an early indicator ahead of the official nonfarm payroll report. The job gains were broad-based, with significant contributions from several key sectors.

Job creation was led by the leisure and hospitality sector, which added 34,000 positions, reflecting continued demand for services as the economy navigates post-pandemic recovery dynamics. The construction sector also performed strongly, adding 26,000 jobs, suggesting robust activity in housing and infrastructure projects. Education and health services followed closely with 24,000 new jobs, underscoring the ongoing need for workers in these essential fields. Other sectors that posted solid gains included professional and business services, which added 20,000 jobs, and other services with 17,000 new positions.

One sector that struggled in September was information services, which saw a loss of 10,000 jobs. This decline stands out as the only major industry to post a net reduction in employment, reflecting potential challenges within the tech and media industries. Manufacturing, on the other hand, saw a modest gain of 2,000 jobs, marking its first positive performance since April. Overall, the goods-producing sectors added 42,000 jobs, while the service-providing sectors contributed 101,000, highlighting the broader strength in services-driven job creation.

Wage growth continued to decelerate, a trend that has persisted in recent months. For job-stayers, wages grew by 4.7% year-over-year, while job-changers saw their pay increase by 6.6%, down from 7.3% in August. This shrinking wage premium for job-switchers suggests that employers may be more cautious about raising wages amid economic uncertainty. In terms of industry-specific pay gains, the construction and education/health services sectors led the way with 5.1% increases for job-stayers. Natural resources and mining saw the lowest wage growth, at 3.6%.

Small businesses with fewer than 20 employees continued to struggle, shedding 13,000 jobs in September. However, medium and large establishments fared much better, with companies employing 50-249 people adding 64,000 jobs, and firms with 500 or more employees contributing 86,000 new positions. This divergence highlights the challenges faced by smaller firms in attracting and retaining workers, while larger organizations appear to be more resilient.

The stronger-than-expected job gains in the ADP report suggest that the labor market remains relatively solid, although wage growth is moderating. These figures will be closely scrutinized by Federal Reserve officials as they weigh their next moves on monetary policy. The Fed has already implemented rate cuts this year and is expected to continue this trend, with the pace and size of future cuts likely depending on the strength of incoming labor market data. The official nonfarm payroll report, due later in the week, will provide further clarity on the state of the U.S. job market.