Last month, the U.S. job market took some serious blows. More surprising is the hit from their employer compatriots, with the latest Payroll Report from ADP showing businesses slashed a seasonally adjusted 32,000 positions. Even more troubling is that this downturn comes at a dangerous funding impasse in Washington, D.C. If lawmakers fail to strike a deal quickly, the upcoming release of the Bureau of Labor Statistics’ nonfarm payrolls report for September could be postponed.
Throughout September, various sectors reported job losses. On the other hand, service providers saw a big hit, losing 28,000 jobs, while goods producers lost 3,000 jobs. Small businesses — defined as businesses with under 50 employees — were especially affected, shedding 40,000 jobs. In contrast, the large employers—those with 500 or more employees—added 33,000 jobs in the same time frame.
Even with the net job loss, some industries showed remarkable strength. During September, education and health services added a remarkable 33,000 net new jobs. This increase was propelled by increased in-person schooling as well as an ongoing shortage of healthcare providers. The overall job market took a hit, with losses shown across all sectors.
The news was bad for professional and business services, which shed 13,000 jobs. An end to the vacation season was felt in leisure and hospitality, which fell by 19,000 jobs. Business and professional services lost 8,000 jobs as did the trade, transportation, and utilities sector, and construction experienced a decline of 5,000 jobs. In further bad news, the other services category (think things like haircuts, gyms, etc.) recorded a loss of 16,000 positions.
The August payroll numbers were revised downward substantially. What we thought was a gain of 54,000 jobs has been revised down to a loss of 3,000 jobs. This change, if last month’s increase was indeed an upward blip, would suggest underlying weakness in the job market and bring hiring momentum into question.
“The narrative remains the same … of a slowing in hiring momentum.” – Nela Richardson
Even with the job losses, wages have been surprisingly resilient. In September real wages skyrocketed 4.5% over a year ago. This is a clear sign that even as hiring appears to be slowing, compensation for existing employees continues to go up.
As Boston Fed President Susan Collins noted, some risks do remain. Though she does see the labor market making no more major moves towards softening in her baseline view. “My baseline outlook doesn’t see the labor market softening much further – but there are risks,” she stated.
As the nation awaits a resolution to the funding stalemate in Washington, it casts a shadow of doubt over the most positive economic indicator seen in ages. A last-minute delay in releasing this critical employment data would severely handicap policymakers. This can blind them to the reality of where the labor market is today.