WASHINGTON (Reuters) -U.S. private payrolls dropped by the most in 2-1/2 years in September, the ADP National Employment report showed on Wednesday, but this is not a true picture of the labor market, which has stagnated as businesses remain cautious about hiring. With the release of the closely watched official employment report for September delayed […]
U.S.
US private payrolls post largest drop in 2-1/2 years
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WASHINGTON (Reuters) -U.S. private payrolls dropped by the most in 2-1/2 years in September, the ADP National Employment report showed on Wednesday, but this is not a true picture of the labor market, which has stagnated as businesses remain cautious about hiring.
With the release of the closely watched official employment report for September delayed after a lapse in funding forced the government to shut down at midnight on Tuesday, the ADP report could, however, attract more attention than usual from investors seeking fresh clues on the labor market’s health.
Tepid demand for workers, blamed by economists on a lagging drag from uncertainty stemming from tariffs on imports as well as the rise of artificial intelligence, is impeding hiring.
Immigration raids have also reduced labor supply, creating what Fed Chair Jerome Powell has described as a “curious balance.”
“Hiring is at risk as policy uncertainty driven by trade and immigration policy as well as long-term demographic challenges that are adversely impacting the availability of labor supply have caused businesses to pull back on hiring,” said Joseph Brusuelas, chief economist at RSM US.
Private employment decreased by 32,000 jobs last month, the biggest drop since March 2023, after a downwardly revised 3,000 decline in August. Economists polled by Reuters had forecast private employment increasing 50,000 following a previously reported 54,000 advance in August.
All the job losses were at small and medium-sized businesses. Large businesses added 33,000 positions. In terms of industries, only education and health services as well as the information industry reported employment gains.
MORE INTEREST RATE CUTS ARE EXPECTED
Government data on Tuesday showed a lethargic labor market, with job openings rising moderately in August and hiring subdued. Economists expect that labor market stagnation will spur the Federal Reserve to cut interest rates again in October.
The U.S. central bank resumed easing policy last month, cutting its benchmark overnight interest rate by 25 basis points to the 4.00%-4.25% range, to aid the labor market.
The ADP report, jointly developed with the Stanford Digital Economy Lab, has a poor record predicting the private payrolls in the Labor Department’s employment report. That report, which had been due to be released on Friday, has been delayed by the 15th government shutdown since 1981.
“The ADP provides very little information of value,” said Oliver Allen, senior U.S. economist at Pantheon Macroeconomics. “The initial ADP estimates for private employment flagged the slowdown in the official payrolls numbers between March and June, but overstated its magnitude.”
The shutdown has also delayed the release of the construction spending report for August that was due on Wednesday. The weekly jobless claims report on Thursday will also not be published.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)