Private Sector Employment Declines by 32,000 in September, ADP Reports

The ADP National Employment Report revealed a decline of 32,000 private sector jobs in September, suggesting continued challenges in the U.S. labor market. This marks the largest drop since March 2023, according to Capital Economics.

The report, based on payroll data from over 26 million U.S. employees, comes amid stronger-than-expected economic growth in the second quarter. However, recent government jobs reports have shown disappointing job growth, with businesses hesitating to hire due to factors like tariffs and artificial intelligence.

Adam Crisafulli, head of investment advisory firm Vital Knowledge, noted, "This is the latest data point signaling a fairly dramatic softening in labor momentum as companies aggressively dial back on hiring."

The decline was primarily driven by small and midsize businesses shedding jobs, while large employers—those with more than 500 workers—added 33,000 employees in September, according to ADP.

ADP also revised its August numbers downward, indicating that private businesses shed 3,000 jobs, contrasting with the earlier estimate of 54,000 jobs added that month.

The government's monthly jobs report, scheduled for release on Friday, October 3, may be delayed due to the government shutdown that began today. Economists polled by FactSet anticipate the report will show employers added 50,000 jobs in September. However, the shutdown raises uncertainty about the report's release and potential delays.

Stephen Brown, deputy chief North America economist with Capital Economics, expressed concern: "Although there is only a passing correlation between monthly changes in the ADP measure of private payrolls and the official non-farm payrolls estimates, the plunge in the former in September is a concern, particularly since the government shutdown could delay the release of the official employment data."

The Federal Reserve is set to make its next interest-rate decision on October 29, with most economists forecasting a 0.25 percentage point cut. The Fed previously lowered its benchmark rate by that amount last month, citing weaker labor market conditions as a reason for easing borrowing costs.

Brown added, "If the shutdown drags on, the weakness in the ADP will be all the Fed has to go on as it considers another rate cut at the FOMC meeting late this month."