The U.S. ADP employment figures for September rebounded more than expected, with the previous figure revised upwards, while wage growth continued to decline

On the eve of the release of the heavyweight non-farm data, ADP, supported by the "mini non-farm," exceeded expectations with its employment data, showing a significant improvement from the previous month, indicating that despite some signs of weakness in overall employment in the United States, it remains generally stable.

On Wednesday, October 2nd, the ADP Research Institute, in collaboration with the Stanford Digital Economy Lab, released data showing that in September, the number of ADP employed persons in the United States increased by 143,000, better than the expected 125,000, exceeding the forecasts of almost all economists surveyed by the media, with the August figure revised from 99,000 to 103,000.

This ADP employment figure rebounded after five consecutive months of slowing growth. The previous August ADP employment data was particularly bleak, hitting the lowest since March 2023. However, it is worth noting that despite the rebound in September, the three-month average employment figure is still only 119,000, one of the lowest levels since 2020.

In terms of industry breakdown, employment brought by service providers was 101,000, with the rest coming from goods producers. Specifically, job growth was quite widespread, with:

The leisure and hospitality industry saw the most growth, adding 34,000 jobs, followed by a 26,000 increase in the construction industry, a 24,000 increase in education and health services, a 20,000 increase in professional and business services, and a 17,000 increase in other services.

The information services industry was the only sector to see a decrease in employment, down by 10,000.

Although the number of hires has increased, wage growth has once again declined. The 12-month wage growth for those staying in their positions slightly decreased to 4.7%, while the wage growth for job switchers fell to 6.6%, down 0.7 percentage points from August.

ADP Chief Economist Nela Richardson stated:

Last month, the increase in hiring did not lead to an increase in wage growth. Typically, wage growth for job switchers is faster. However, the wage growth gap between job switchers and those staying in their positions narrowed to just 1.9%, matching our lowest level from January.

In terms of business size, all employment growth came from companies with more than 50 employees. Employment in small businesses decreased, with companies with fewer than 20 employees seeing a decrease of 13,000 jobs

After the U.S. ADP employment data exceeded expectations, the yield on U.S. Treasury bonds widened, with the 2-year bond yield rising more than 2 basis points to 3.637%. The U.S. dollar rose 1% against the Japanese yen to 145.01. The U.S. stock market remained relatively stable.

Some analysts pointed out that due to the weakening of U.S. bonds, although the latest ADP data exceeding expectations may put some pressure on the bond market, the impact should be mild and short-lived. The extent of the surprise is completely within the margin of error, so it does not really tell us anything new.

According to a report released by the U.S. Department of Labor on Tuesday, U.S. job vacancies unexpectedly rose to a three-month high in August, exceeding economists' expectations. The data also indicates that despite the overall slowdown in U.S. job growth, it remains relatively stable, consistent with the latest ADP private payrolls data.

This Friday, just two days later, the U.S. Department of Labor will release the highly anticipated non-farm payroll report. The market expects the report to show an increase of 150,000 jobs in September, with the unemployment rate remaining at 4.2%. In August, the non-farm payrolls increased by only 142,000, falling short of expectations, and the previous value for July was significantly revised downward, disappointing the market. Although the ADP employment report is a precursor to the official non-farm data, there may be differences between the two, sometimes significant.

With the cooling of the U.S. labor market, such as a clear upward trend in the non-farm unemployment rate, the ISM manufacturing employment index remains weak, and other indicators of job growth have cooled, making labor market data even more important than inflation and the most closely watched economic data. Policymakers and investors use this to assess whether more signals have been released on whether the U.S. economy can achieve a soft landing.

Due to concerns about further deterioration in the U.S. labor market, the Federal Reserve made a significant 50 basis point rate cut in September. Federal Reserve Chairman Powell stated on Monday that the U.S. labor market remains strong but has clearly cooled over the past year. "We don't think we need to see further cooling in labor market conditions to achieve the Fed's 2% inflation target."