An ADP report shows private-sector employment jumped by 42,000 in October, a snapshot of the jobs market as the government shutdown threatens another month of federal economic data.
The job growth was driven by large companies, with small and mid-sized companies shedding more workers than they added.
The ADP data, pulled from its customers’ payrolls and released Wednesday, offers a breakdown of 10 industries. Half saw growth while half saw job losses.
Education, health care, trade, transportation and utilities led the growth.
Companies shed jobs in professional business services, information and leisure and hospitality.
Most of the new jobs, 33,000, were added in service sectors. Just 9,000 jobs were added in goods-producing sectors.
ADP said this marked the first employment increase since July after a revised loss of 29,000 jobs in September and a smaller loss in August. Pay growth was also flat at 4.5% for job-stayers and 6.7% for job-changers.
“This is the best we’re going to be able to do,” Colorado State University economist Stephan Weiler said of the ADP employment report as a fill-in for the monthly jobs report from the government.
The government reports are on hold because of the shutdown. The last Bureau of Labor Statistics jobs report was released two months ago and covered August.
At the time, employers had added 22,000 jobs the previous month. And the unemployment rate ticked up to 4.3%, its highest since 2021 by a slight margin.
Until the shutdown is over, there won’t be an official update on the health of the jobs market from the government.
Is the ADP report an adequate replacement?
“In the short term, it’s not a bad substitute,” labor economist Aaron Sojourner said.
But he said it’s not a representative sample of the national labor market. And he said ADP relies on the BLS for the right weights to apply to its proprietary data to make its data more representative. Those weights aren’t outdated yet, he said. But the longer ADP goes without BLS data, the hard it becomes. ADP also omits government employment.
ADP’s sample, 26 million private-sector employees, is just about one-sixth the size of the nation’s full workforce.
Mark Hamrick, Bankrate’s senior economic analyst, said the BLS data is the gold standard.
“And that’s not to be dismissive or derisive about the ADP data. It’s just not the same,” he said.
Hamrick said the ADP report is a useful piece of the puzzle, but the lack of BLS data limits visibility.
“If you’re a central banker, if you’re a consumer, which most people are, if you’re a business leader, if you’re an investor, you can’t stop making decisions,” he said. “But you may defer some of your decisions until you have better clarity.”
Business professor Jay Zagorsky said ADP tends to service medium and large firms but not giant or tiny companies. That, too, is a limiting factor in its data, he said.
“If you’re a giant firm, you’re not going to use, necessarily, ADP. It’s probably just as effective to do it in-house. And if you’re a very small firm, say micro firm, one or two employees, five employees, ADP is too much of an overkill,” said Zagorsky, a professor with the Questrom School of Business at Boston University. “So, you’re missing both ends of the market.”
Sojourner said BLS runs both an employer survey and a household survey. There’s nothing in the ADP report that replicates the household survey, which produces the unemployment rate, labor force participation rate and more.
He didn’t get too excited over the addition of 42,000 jobs reported by ADP.
Growth is good, but the month-to-month swing wasn’t enough to write home about, Sojourner said.
“These are all estimates. They’re all imperfect. They’re all noisy. There’s a margin of error in all of this,” he said.
Zagorsky said the growth reflected in the report wasn’t widespread across industries. Big companies, such as utilities, drove the overall increases.
“So, while there are bright spots in the economy, this is not the overall economy is doing well,” he said. “Only a few sectors and a few geographic areas seem to be doing well.”
Weiler said the basic features of the ADP report look correct, even if it lacks the size and scope of the government data.
“In other words, goods-producing sectors lost jobs, and that’s been a continuing trend. Service industry has been gaining, and that’s also been a trend,” he said. “And the wage rates look about like they’ve been.”
Weiler said the upswing in jobs is worth noting simply because it offers information to the Federal Reserve that is struggling to map its rate cut strategy to support employment and keep inflation in check.
Another rate cut in December, after cuts in the last two months, is far from a given, he said.
Sojourner, with the W.E. Upjohn Institute for Employment Research, said the jobs market has stagnated. Companies are uncertain what’s coming at them, and they’re not making any big moves.
“If you don’t have a job, it’s really hard to find a new job,” he said.
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