Private-sector hiring rebounds as ADP reports 90,000 new jobs in September

Private-sector employers added 90,000 jobs in September, payroll processor ADP reported Wednesday, a sharper-than-expected rebound that snapped three straight months of slowing hiring and complicated the picture for a Federal Reserve that raised interest rates only two weeks ago to contain inflation that has proven difficult to dislodge.

The gain, detailed in the ADP National Employment Report, beat the roughly 70,000 jobs economists had forecast and came alongside an upward-revised look at the prior month, though August itself was revised down to 36,000 jobs from an initial 38,000. The September figure is the strongest since spring and arrives two days ahead of the Labor Department's own nonfarm payrolls report, which economists expect to show a gain of about 84,000 jobs and an unemployment rate holding at 4.1%.

The numbers

ADP's data, drawn from anonymized payroll records covering more than 26 million private-sector employees, showed hiring was led by the service sector, which added 59,000 jobs. Education and health services alone accounted for 55,000 of those positions, while leisure and hospitality added 22,000. Those gains were partly offset by losses in financial activities, which shed 16,000 jobs, and professional and business services, down 11,000 — a pocket of white-collar weakness that has persisted through much of the year as employers lean on automation and artificial intelligence tools to hold down headcount in back-office and support functions.

Goods-producing industries added 31,000 jobs, with manufacturing contributing 17,000 and construction 15,000. By company size, mid-sized firms with 50 to 499 employees did the heaviest hiring, adding 54,000 positions, while large employers with 500 or more workers added 34,000 and small businesses added 23,000.

Pay growth held steady even as hiring accelerated. Annual pay for workers who stayed in their jobs rose 3.0%, while those who switched employers saw base pay climb 4.8%, according to the report. Combined with bonuses and other compensation, overall gross pay was up 4.7% from a year earlier, little changed from August.

• Private payrolls: +90,000 in September, versus roughly +70,000 expected
• August payrolls revised down to +36,000 from an initially reported +38,000
• Education and health services led sector gains, adding 55,000 jobs
• Financial activities (-16,000) and professional/business services (-11,000) posted the largest declines
• Annual pay growth: 3.2% for all workers, 4.8% for job switchers

How the labor market got here

The rebound follows a stretch in which hiring had cooled for three consecutive months, feeding concern that the labor market was losing momentum even as inflation stayed above the Fed's target. That combination — slower job growth paired with stubborn price pressure — put policymakers in an unusually difficult position heading into their September meeting.

The Federal Reserve opted on Sept. 16 to raise its benchmark rate by a quarter percentage point, to a range of 3.75% to 4.00%, rather than hold steady or cut, saying inflation remained elevated and that the move would support "a timelier return" to its 2% goal. It was the central bank's first rate increase since 2023 and a reversal from the rate-cutting path investors had anticipated earlier in the year, underscoring how persistent price pressures have forced the Fed to prioritize inflation control even as growth signals have been mixed.

ADP's own research arm has tracked the deceleration in near-real time through its weekly employment index, which showed hiring gradually reaccelerating through late summer after a soft patch. The ADP Research team, which compiles the monthly report independently of the company's payroll-processing business, said pay growth for both job-stayers and job-switchers has been gradually cooling over the past year even as it remains well above pre-pandemic norms.

Who is affected

The divergence between sectors points to an economy where growth is uneven. Health care and education providers, along with restaurants, hotels and other hospitality employers, continue to add workers steadily, reflecting demand that has held up regardless of interest-rate policy. Construction and manufacturing also posted solid gains, a signal that industrial activity has not slowed as much as some surveys had suggested.

By contrast, banks, insurers and other financial-services firms, along with law firms, consulting shops and other professional-services employers, continued to shed positions. Economists have pointed to cost discipline, restructuring and the adoption of AI-driven tools as factors weighing on hiring in those white-collar segments, a trend that has shown up repeatedly in ADP's sector data over the past year. Workers in those industries face a tighter job market even as headline hiring figures look healthy.

Reaction

ADP chief economist Nela Richardson framed the report as evidence that the softening seen over the summer was not the start of a deeper downturn.

"After a three-month slowdown, job creation rebounded and pay growth remained solid."

The report drew a cautious reception from market analysts, many of whom said a hotter-than-expected jobs number gives the Fed further reason to hold its tightening bias into the fall rather than pivot toward cuts, coverage from Fox Business noted Wednesday. The reaction reflects a broader recalibration among traders, who have spent much of the past two weeks paring back bets on near-term rate cuts after the Fed's surprise hike and now see the strength of the labor market as a key swing factor for the central bank's next move.

What happens next

Attention now turns to Friday, when the Bureau of Labor Statistics is due to release its September employment situation report, the more comprehensive government survey that the Fed weighs most heavily in its policy deliberations. Congress averted a federal funding lapse ahead of the Sept. 30 deadline, passing a stopgap measure that keeps agencies — including the Labor Department — funded through Dec. 11, meaning Friday's release is not expected to face the kind of shutdown-related delay that has disrupted data collection in past years.

The Fed's rate-setting committee does not meet again until Oct. 27-28, giving policymakers time to weigh both the ADP figures and Friday's government report, along with inflation data due out before then. Investors will be watching closely for whether the pickup in hiring proves durable or whether it was, as some economists cautioned, a one-month bounce after a genuinely soft summer for the labor market.