US ADP employment in September increased by only 89,000, far below expectations, marking the lowest level since the beginning of 2021.

On Wednesday, October 4th, the "mini non-farm" ADP employment report in the United States showed that the seasonally adjusted employment in the private sector increased by only 89,000 in September, the lowest since the beginning of 2021, significantly lower than the expected 150,000, and the previous value was revised from 177,000 to 180,000.

The latest ADP report shows that almost all of the employment growth comes from the service industry, contributing a total of 81,000 jobs. Among them, almost all of them come from the leisure and hospitality industry, adding 92,000 jobs.

Other industries that saw an increase in employment include financial activities with 17,000 jobs, construction with 16,000 jobs, and education and healthcare services with 10,000 jobs. However, these increases were offset by a decrease of 32,000 in professional and business services. In addition, the trade, transportation, and utilities sectors in manufacturing decreased by 12,000.

In terms of company size, small businesses with fewer than 50 employees saw the strongest employment growth, adding a total of 95,000 jobs. Medium-sized businesses with 50-500 employees contributed 72,000 jobs. Large companies with 500 or more employees lost 83,000 jobs, the second-largest decline since the early stages of the COVID-19 outbreak.

ADP data also shows that wage growth continued to slow in September, with a median year-on-year increase of 5.9% for employees, marking the 12th consecutive month of decline and the smallest increase in two years. For job switchers, the median wage increase was 9%, the lowest since June 2021.

Looking at the regions, except for the South, all other regions saw an increase in workers in September.

The ADP data indicates a significant slowdown in private sector employment growth in the United States in September. The report provides some signs that the tight labor market in the United States may be easing, as some employers are reducing their hiring scale amid persistent inflation and rising borrowing costs. This employment data provides some impetus for the Federal Reserve to pause its rate hikes, as the previously strong labor market was believed to contribute to sticky inflation.

Nela Richardson, Chief Economist at ADP, said:

This month, we saw a sharp decline in job positions. In addition, we found that wages have steadily declined over the past 12 months. After the release of the ADP data, market expectations for the Federal Reserve to raise interest rates again this year have decreased. As a result, US stock index futures rebounded, US bond yields declined, the US dollar weakened, and gold prices rose:

• US stock index futures saw an expanded increase, with Nasdaq 100 index futures rising by about 0.5%.
• The yields on US 30-year and 10-year Treasury bonds slightly declined.
• The US dollar index fell by 20 points in the short term, reaching 106.61. Non-US currencies generally rose, with the euro against the US dollar rising by nearly 30 points in the short term, and the pound against the US dollar rising by 30 points in the short term.
• Spot gold prices rose by $3, reaching $1828.87 per ounce. New York gold prices rose by $5 within 5 minutes, reaching $1845.7 per ounce.

The day before the release of the ADP employment data, the US released the JOLTS job openings data. The JOLTS data lags behind the ADP data by one month. The job openings in the US in August far exceeded expectations, with a significant increase in white-collar positions, highlighting the resilience of the labor market. This data caused a strong market reaction, with US stocks falling across the board on Tuesday, the Dow turning negative for the year, long-term US bond yields rising to the highest level in 16 years since 2007, and the US dollar rising.

It should be noted that although the ADP data is known as "small non-farm payroll," there may still be significant differences compared to the government's official non-farm payroll data. This Friday, the highly anticipated September non-farm payroll report will be released in the US. The market expects the US to add approximately 170,000 non-farm jobs in September, and the unemployment rate is expected to decrease slightly. In August, the unemployment rate increased significantly due to the rebound in labor force participation.