By Tom Ozimek
Private sector employment in the United States rose by 571,000 jobs in October, well above consensus forecasts of 395,000, according to Nov. 3 payroll data from the Automatic Data Processing (ADP) Research Institute.
“The labor market showed renewed momentum last month, with a jump from the third quarter average of 385,000 monthly jobs added, marking nearly 5 million job gains this year,” Nela Richardson, ADP chief economist, said in a statement.
While there was an encouraging acceleration in small-business hirings at 115,000, large firms led the gains at 342,000; mid-sized businesses added 114,000 jobs.
“Service sector providers led the increase and the goods sector gains were broad-based, reporting the strongest reading of the year. Large companies fueled the stronger recovery in October, marking the second straight month of impressive growth,” Richardson said.
Leisure and hospitality accounted for the bulk of the gains, adding 185,000 jobs, followed by professional and business services at 88,000.
While differences in methodology mean there’s often a weak correlation between ADP employment data and the Bureau of Labor Statistics’ (BLS) closely watched nonfarm payrolls report, which is due on Nov. 5, the ADP data serve as a barometer of labor market health and is often looked to as a predictor of the government’s official job creation statistics.
“Take it with a grain of salt, though. This number is close to last month’s ADP report, but the official BLS figure came in way below,” Liz Young, head of investment strategy at SoFi, wrote on Twitter.
September’s ADP report indicated that employers added 568,000 jobs—which has been revised down in the current report to 523,000—while September’s BLS figures came in at a lackluster 194,000.
“The September jobs report was extremely disappointing in this context of the massive so-called stimulus,” economist and Epoch Times contributor Daniel Lacalle, wrote in an op-ed commenting on the below-expectations BLS figure.
“Disguising it as ‘labor shortages’ is simply a joke. A dreadful 194,000 jobs were gained versus 500,000 expected in nonfarm payrolls in September with the labor force falling by 183,000, leaving it still 3 million below pre-pandemic levels. The report shows that the economy has seen 15 months of a stagnant labor participation rate of 61.6 percent,” Lacalle wrote.
Market reaction was muted following the release of the ADP’s jobs numbers, with labor market data overshadowed by the Federal Reserve policy meeting on Nov. 3, at which officials were expected to announce the start of tapering of the central bank’s massive asset-buying program. Gold, a safe haven asset that tends to perform well on weak economic data beats, saw a relatively sharp selloff down to mid-October levels.
“This month both numbers will take a back seat to the Federal Open Market Committee (FOMC) meeting on [Nov. 3],” FXStreet analyst Joseph Trevisani wrote in a note, referring to the ADP jobs report and the forthcoming BLS nonfarm payroll figures. “After six months of hints, retreats, explanations, and evasions, the policy body of the U.S. central bank is widely expected to announce a reduction in its monthly bonds purchases.”
Bankrate Chief Financial Analyst Greg McBride told The Epoch Times in an emailed statement that he expects the FOMC to announce that it will start tapering in November.
“Dialing down their $120 billion in monthly purchases in $15 billion increments—reducing purchases of Treasuries by $10 billion and mortgage-backed securities by $5 billion per month—gets them done by the end of June,” McBride said.
Investors will also keep a close eye on the Fed’s policy announcement following the conclusion of the FOMC meeting for any hints about the timing and extent of interest rate hikes.
The Fed’s latest dot plot (pdf), which shows policymakers’ rate-hike forecasts, indicates half of the 18 members of the FOMC are anticipating a rate boost by the end of 2022 and the other half are predicting the beginning of rate increases by the end of 2023.