Private sector hiring blew past expectations in October, another sign that the US labor market remains on solid footing, payroll processor ADP reported Wednesday.
Non-governmental employers added 233,000 jobs in October, a sharp acceleration from the 159,000 net increase reported for September, according to ADP’s latest National Employment Report.
“In a month that promised to be super messy with double-hit hurricanes, we are seeing that the national labor market was strong and broadly robust,” Nela Richardson, chief economist at ADP, said Wednesday during a call with reporters.
Wednesday’s gains throttled economists’ expectations for job growth to slow to a mere 108,000 jobs from the initial estimate of 143,000, FactSet estimates show.
Job gains were fully expected to drop off in October not only because of an ongoing slowdown in the labor market but also because the month’s data could likely be influenced by three major events and their ripple effects: the ongoing Boeing machinists’ strike, Hurricane Helene and Hurricane Milton.
While ADP’s tabulations don’t always correlate with the official jobs report from the Labor Department, they are sometimes viewed as a proxy for overall hiring activity.
However, there’s an important methodology distinction between the two reports and to what extent these temporary shocks could distort data:
ADP’s estimates are derived from the number of workers on payroll through its systems, meaning those workers are counted as employed whether or not they received a paycheck during the reference week.
However, the Bureau of Labor Statistics counts workers as employed if they were paid during the reference period.
“Since striking workers are on payroll, they’re counted as employed in the ADP methodology, as are workers who could not get to their jobs because of the hurricane disruption,” Richardson said in response to a question from .
Still, ADP did see an impact from the hurricanes, Richardson said, noting that North Carolina and Florida saw drops in weekly paychecks during the reference period of 7.7% and 6.6%, respectively. However, by the following week, both states rebounded to pre-hurricane levels.
Economists are still expecting for Friday’s jobs report to show watered-down employment gains. Pantheon Macroeconomics is sticking with its forecast of 100,000 payroll gains, according to an investors note sent Wednesday.
“After Irma struck Florida in September 2017, ADP reported a 205,000 increase in private payrolls, but the first official estimate for the month was a fall of 33,000,” Samuel Tombs, chief US economist at Pantheon Macroeconomics, wrote in the note. “The reported ADP jobs numbers by region for October show zero hit from Milton, with a net 60,000 increase in the South Atlantic region, which includes Florida.”
He added: “We expect only a modest hit to payrolls from Milton … but it’s hard to imagine that the hurricane somehow propelled job growth in the affected region upwards.”
Wednesday’s report showed that the underlying trend of the labor market is one of strength, Richardson said.
“Over the summer, there seemed to be a malaise, and I think it was easy to interpret that malaise in hiring as a slowing trend in labor demand,” she said. “In actuality, it looks like that malaise was just waiting for some of the uncertainty of the year to clear up.”
Then, the Federal Reserve came through with a half-point rate cut in September and indicated that more would be on the way.
“That signals, I think, to a lot of companies that it was OK to proceed with their (hiring) plans,” she said.
And while a resurgence in the labor market could raise concerns about a reacceleration in inflation, October’s ADP data showed otherwise, Richardson said.
Pay gains for both job-stayers and job-changers continued to slow, and the “premium” for job-switching, which had peaked at 9% in 2022, fell to 1.5%, the lowest on record, Richardson said.
“It explains a little bit the drop in the quits rate we were seeing and the fact that turnover is very low in many companies,” she said. “It also signals that wages will not be the trigger for any kind of rebound in inflation.”
