Private Payrolls Rebound in October, Adding 42,000 Jobs, ADP Says

Data from ADP are receiving more attention because the Bureau of Labor Statistics isn’t publishing its usual employment statistics. (Patrick T. Fallon/Bloomberg)

Key Points

• U.S. private payrolls increased by 42,000 jobs in October, exceeding the FactSet consensus estimate of 37,500.
• Services led job growth, with trade, transportation, and utilities adding 47,000 positions and education and healthcare adding 26,000.
• Wage growth for job stayers was up 4.5% year-over-year, while job changers saw a 6.7% increase in October.

October delivered a much-needed pickup in private-sector hiring after months of erosion, but the recovery is still fairly tepid and many sectors remain moribund. It may be enough of a concern to keep Federal Reserve officials cutting in December.

The U.S. added 42,000 jobs to private payrolls last month, according to the ADP National Employment Report released Wednesday morning.

That was a stronger print than economists surveyed by FactSet were expecting; with the consensus estimate calling for just 37,500 jobs added in October. The rebound last month was also a total reversal from the 29,000 positions ADP reported companies shed in September.

“Private employers added jobs in October for the first time since July, but hiring was modest relative to what we reported earlier this year,” said Nela Richardson, ADP’s chief economist.

Payroll data from ADP, the private payroll processor, have gained prominence in recent months because most federal economic data aren’t available. Since the start of the government shutdown on Oct. 1, the Bureau of Labor Statistics hasn’t collected, processed or distributed any of its typical employment data—including the critical monthly jobs report that provides a snapshot of hiring trends, unemployment, average wage growth, and hours worked.

Even if the government shutdown ends in the coming weeks, the BLS may need to delay the release of October payroll data until after the Federal Reserve’s Dec. 9-10 policy meeting. “In that case, this release – while imperfect – suggests the labor market has at least stabilized in recent months, but still lacks real momentum,” writes Thomas Ryan, North America economist for Capital Economics.

The lackluster employment conditions could be a clear enough signal for Fed policymakers to implement another interest-rate cut at the December meeting.

Part of the concern is because last month’s stronger hiring momentum wasn’t broad-based. The services side of the labor market delivered most of the gains, led by 47,000 positions added to the trade, transportation, and utilities sector, marking the strongest reading since February 2023. The education and healthcare sector, a stalwart in hiring for much of this year, added 26,000 jobs.

Job growth in professional business services, information, and leisure and hospitality declined for the third straight month. The fact that leisure and hospitality sector, in particular, shed 6,000 jobs is concerning because that points back to consumer health and how resilient companies expect Americans to be in the coming months, Richardson said.

“This negative number is something to watch as we go into the holiday season,” she said.

The goods-producing side of the economy added about 9,000, led by the natural resources and mining sector. But manufacturing lost 3,000 jobs.

Wednesday’s data also showed differences in hiring between small and large businesses. Companies employing at least 250 workers added 76,000 jobs, the bulk of the payroll gains seen last month. Small and midsize businesses employing less than 250 workers, however, shed approximately 35,000 jobs overall.

The pickup in private payrolls reported last month was in line with weekly ADP pulse data, released for the first time on Oct. 28, that found total private employment grew by an average of 14,250 jobs a week in the four weeks through Oct. 11. That compares with an average gain of 10,750 jobs in the four weeks ended Oct. 4.

Wage growth was fairly flat last month compared with September, but has remained a stabilizing force within the labor data, Richardson said. Pay was up 4.5% year over year for employees who have stayed in the same position, while those changing jobs saw wages increase 6.7% year over year in October.

“While it’s slim pickings for labor market data right now, Wednesday’s ADP update at least gave investors some reassurance that the jobs market isn’t falling apart,” writes Bret Kenwell, eToro U.S. investment analyst.

Write to Megan Leonhardt at megan.leonhardt@barrons.com