Private Payrolls Decline by 32,000 in September
Private payrolls experienced their largest monthly decline in two and a half years in September, underscoring growing signs of labor market weakening amid a concurrent government data blackout caused by the ongoing U.S. shutdown.
Payroll processing firm ADP reported a seasonally adjusted drop of 32,000 jobs for the month, a stark contrast to economist expectations of a 45,000 increase. This marks the most significant contraction since March 2023.
Additionally, August’s payroll figures were revised sharply downward from an initially reported gain of 54,000 to a loss of 3,000 jobs, signaling a broader slowdown in labor market momentum.
Government Shutdown Halts Key Employment Data Releases
The current funding impasse in Washington, D.C., has resulted in the first federal government shutdown since 2018-2019, leading to a suspension of critical labor market data releases. The Bureau of Labor Statistics (BLS) will not publish the official nonfarm payrolls report for September, nor will the Labor Department release weekly jobless claims data.
Such data blackouts complicate Federal Reserve officials’ ability to assess labor market conditions ahead of their next policy meeting scheduled for October 28-29, with markets widely anticipating another interest rate cut.
Widespread Job Losses Across Sectors
Job losses in September were broadly distributed across multiple sectors. Leisure and hospitality, a critical area for consumer spending, shed 19,000 jobs as the vacation season ended. Other services declined by 16,000, professional and business services by 13,000, trade, transportation and utilities by 7,000, and construction by 5,000.
Conversely, education and health services posted a gain of 33,000 jobs, supported by school reopenings and ongoing healthcare hiring trends.
On a broader scale, service providers lost 28,000 jobs while goods-producing sectors fell by 3,000. Smaller businesses with fewer than 50 employees cut 40,000 jobs, whereas larger firms with 500 or more employees added 33,000 positions.
Labor Market Outlook and Wage Trends
Despite robust economic growth in the second quarter, with GDP expanding 3.8% and forecasts pointing to 3.9% growth in Q3, labor market indicators point to increased employer caution in hiring.
“Despite the strong economic growth we saw in the second quarter, this month’s release further validates what we’ve been seeing in the labor market, that U.S. employers have been cautious with hiring,” said ADP Chief Economist Nela Richardson.
Wage growth remained steady at 4.5% year-over-year in September, although the pace of increases for employees changing jobs slowed to 6.6%, down half a percentage point from August.
Boston Federal Reserve President Susan Collins highlighted risks ahead, noting the potential for labor demand to fall short of supply, which could push unemployment higher.
“I see some increased risk that labor demand may fall significantly short of supply, leading to a more meaningful and unwelcome increase in the unemployment rate.”
– Boston Fed President Susan CollinsFinOracleAI — Market View
The ADP report’s indication of significant private sector job losses amid a government data blackout presents a complex backdrop for market watchers and policymakers. The absence of official BLS data heightens reliance on private estimates, which show slowing hiring and sectoral weaknesses. While economic growth remains solid, labor market caution and potential risks to employment growth warrant close monitoring.
- Opportunities: Potential for Federal Reserve to cut interest rates further to support growth.
- Risks: Prolonged labor market weakness could raise unemployment rates beyond current forecasts.
- Data blackout increases uncertainty around timely labor market assessment.
- Sector-specific declines may signal a broader economic slowdown in consumer-facing industries.
- Wage growth moderation may ease inflationary pressures but impact consumer spending.
Impact: The report signals a cautious labor market environment, complicating Federal Reserve policy decisions amid incomplete official data and increasing downside risks to employment.
