Employers added only 89,000 jobs in September, falling well below expectations, according to private payroll firm ADP. This disappointing increase in job numbers was mainly concentrated in the leisure and hospitality sector, with those industries adding 92,000 employees. However, it’s worth noting that the report showed large companies shed 83,000 workers during the same period. Economists had predicted a gain of around 150,000 jobs, following the revised figure of 180,000 jobs added in August.
Nela Richardson, chief economist at ADP, expressed her concern over the steep decline in jobs during September. She also highlighted a steady decline in wages over the past 12 months. Wages did rise at an annual pace of 5.9%, which is down from August but still at a level that will raise concerns at the Federal Reserve.
This report comes after the Labor Department’s report on job openings for August, which revealed a surprising 9.6 million available jobs. Most of the gains were seen in the business and professional services category. However, this single month of data from the Labor Department does not paint a complete picture, so economists will be analyzing a broader list of indicators to get a clearer understanding of the job market.
The government is set to release its monthly jobs report for September on Friday, and estimates suggest a slight dip from August’s reading of 177,000 jobs added. Julia Pollak, chief economist at ZipRecruiter, believes that the labor market is cooling down, which she sees as a “normalization” following the trends seen in the post-pandemic period.
Despite the slowdown in job growth, the job market remains tight by historical standards. While wages have softened somewhat, the rate of annual growth is still roughly double the Federal Reserve’s inflation target of 2%. The Fed has indicated its intention to keep interest rates higher for a longer period, leading to a sell-off in stocks and rising yields on bonds.
The surge in bond yields, with the 10-year bond yield currently at around 4.8%, is attributed to an unusual combination of factors. These include the Fed reducing its balance sheet by not rolling over some of its government securities holdings and decreased demand for U.S. debt from foreign buyers. Jose Torres, senior economist at Interactive Brokers, notes that the significant balance sheet runoff and reduced international interest in U.S. bonds could push the 10-year yield above 5%.
In conclusion, the September jobs report raises concerns about the overall health of the job market. With job growth falling short of expectations and wages on a steady decline, economists will closely monitor other indicators to assess the situation accurately. The market also faces other challenges such as rising bond yields and increased political polarization, which could further impact the economy in the coming months.