ADP: Slower Payrolls Growth In October

Payrolls increased this month by the smallest amount since April, according to this morning’s update of the ADP Employment Report. The 130,000 gain for October is near the slowest pace of growth in recent years for this data series and so today’s release raises new concerns for the economy’s outlook. “Any further weakening would signal rising unemployment,” says Mark Zandi, chief economist of Moody’s Analytics, which partners with ADP to produce the payrolls data. “The weaker job growth is evident across most industries and company sizes,” he notes in a press release (pdf) that accompanies today’s report.


It’s possible that the weak numbers in October are related to the fiscal war that consumed Washington in the first half of this month. “The government shutdown and debt limit brinksmanship hurt the already softening job market in October,” Zandi observes. On the bright side, the year-over-year increase of roughly 1.8% for ADP payrolls endures in the data du jour. This relatively steady annual trend suggests that the recent slide in the monthly comparisons is noise. Nonetheless, next month’s update will be closely watched for a downside crack in the year-over-year change. A sharply lower number, if it comes to that, would provide a more-disturbing sign for the labor market and the economy overall.

For now, it’s obvious that there’s more macro uncertainty these days. Deciding if this reflects a fundamental change for the worse in the business cycle vs. a temporary effect from the government shutdown is still an open question. What we do know is that October is proving to be a rough month. Consumer confidence this month took a sharp tumble, according to yesterday’s update from the Conference Board (CB). “Consumer confidence deteriorated considerably as the federal government shutdown and debt-ceiling crisis took a particularly large toll on consumers’ expectations,” says CB’s Lynn Franco.
Figuring out if the toll will roll will take several weeks at a minimum, starting with tomorrow’s jobless claims report. The good news is that economists expect another modest decline in new filings for unemployment benefits, according to Briefing.com. But given the shaky numbers this week, including yesterday’s mixed news on retail sales for September, Mr. Market’s in no mood for another round of disappointing data.

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