Hiring at U.S. companies experienced a resurgence in September, reversing a five-month period of declining payroll growth. According to data from the ADP Research Institute, in collaboration with the Stanford Digital Economy Lab, private payrolls increased by 143,000 in September. This exceeded economists’ expectations of 125,000 jobs, based on a Bloomberg survey.
Despite this improvement, the three-month hiring average slipped to 119,000 jobs, one of the lowest levels since 2020. This reflects broader signals that the labor market may be cooling. Rising unemployment, slowing job growth, and other indicators have prompted the Federal Reserve to take action, including a larger-than-usual interest rate cut in September, aimed at curbing further economic weakening.
Federal Reserve Chair Jerome Powell recently acknowledged that while the labor market remains solid, there has been a marked cooling over the past year. He emphasized that the Fed doesn’t believe further softening is necessary to meet its inflation target of 2%.
The ADP data precedes the official government jobs report, expected to be released on Friday, which is forecast to show moderate payroll growth in September and the unemployment rate holding steady at 4.2%.
Additional reports on Tuesday also painted a mixed picture. While job openings unexpectedly rose in August, hiring rates have slowed, matching the lowest levels since 2013, excluding the early months of the pandemic. Data from the Institute of Supply Management also indicated a reduction in manufacturing employment, with the smallest share of employers adding jobs since May 2020.
Wage Growth Slows Wage growth in September also slowed. For workers switching jobs, earnings rose by 6.6% compared to a year earlier, the weakest pace since April 2021. Meanwhile, wage gains for employees who remained in their positions dipped slightly to 4.7%, according to ADP’s report.
“Stronger hiring didn’t require stronger pay growth last month,” said Nela Richardson, ADP’s chief economist. “Typically, workers who change jobs experience faster pay growth, but that trend has moderated.”
Hiring was broad across industries, with leisure, hospitality, and construction leading the way. The information sector was the only industry to cut jobs in September. Regionally, hiring was dispersed across the U.S., though companies with fewer than 20 employees were the only group to reduce headcount.
Despite a relatively stable job market, some companies have announced layoffs. CVS Health Corp. plans to cut around 2,900 jobs as part of a strategic review, while Samsung Electronics is reducing its workforce in Southeast Asia, Australia, and New Zealand as part of broader global layoffs.
ADP’s findings are based on payroll data that tracks over 25 million private-sector employees in the U.S.
Analysis and Market Opportunity: This recent uptick in hiring offers an encouraging sign that parts of the labor market remain resilient despite broader economic headwinds. For investors, this could suggest that consumer spending, particularly in leisure and hospitality, may remain strong. That, in turn, could support broader market confidence as these sectors rebound, offering potential upside in associated stocks.
However, the subdued wage growth could dampen optimism for inflation-linked assets. The Fed’s cautious approach, along with signs that inflation may stabilize, could open up opportunities for bond investors as rate hikes ease. Equities in sectors tied to discretionary spending may also see a boost if labor market stabilization continues without excessive wage-driven inflation.
