The US September ADP employment data shows a rise of 143,000 jobs, surpassing the forecasted 125,000 and marking a notable improvement from the revised August figure of 103,000. This increase comes after five months of slowing job growth, with employment gains predominantly seen in companies with more than 50 employees.
The service sector added 101,000 jobs, while the goods-producing sector contributed the rest. Notable industry gains include 34,000 in leisure and hospitality, 26,000 in construction, 24,000 in education and health services, and 20,000 in professional and business services. The information sector was the only one to experience a decline, losing 10,000 jobs.
Despite the rise in hiring, wage growth continued to slow. Employees who stayed in their roles saw a 4.7% annual increase in wages, while those who switched jobs experienced a 6.6% increase, down from the previous month.
The ADP data release led to changes in the financial markets, with US Treasury yields rising and the US dollar gaining against the Japanese yen. However, analysts suggest that the impact on Treasury markets will be minimal due to the already anticipated weakness in US bonds.
Coming up is the US Labor Department's non-farm payroll report, expected to show an increase of 150,000 jobs for September, with the unemployment rate holding at 4.2%. This report will be closely watched as it provides further insights into the state of the US labor market.
ADP's chief economist highlighted that increased hiring has not translated into higher wage growth. The difference in wage increases between job switchers and stayers has narrowed significantly.
Following the ADP data release, the two-year Treasury yield increased by over 2 basis points, and the dollar strengthened against the yen. US stock market reactions were muted.
The labor market data remains crucial for policymakers and investors, who are evaluating whether the US economy can achieve a soft landing. Given the recent cooling in the labor market, including a notable upward trend in the non-farm unemployment rate and persistent weakness in manufacturing employment indices, labor data may be more critical than inflation data in assessing economic stability.
Due to concerns over the labor market, the Federal Reserve made a significant rate cut of 50 basis points in September. Fed Chair Jerome Powell stated that while the labor market remains robust, there has been a noticeable cooldown over the past year, suggesting that further softening is not necessary to achieve the Fed's 2% inflation target.
