US companies added a relatively soft 135,000 workers in September, a hefty slide from the 228,000 advance in the previous month, according to this morning’s release of the ADP Employment Report. Looking at the last data point in a vacuum suggests there’s trouble brewing for the economy. But the year-over-year trend suggests otherwise, which is encouraging. All the more so when you consider that the temporary effects of two hurricanes probably played a role in last month’s slowdown in hiring.
“Hurricanes Harvey and Irma hurt the job market in September,” says Mark Zandi, chief economist of Moody’s Analytics, which co-produces the data with ADP. “Looking through the storms the job market remains sturdy and strong.”
The annual trend in the latest ADP figures support’s Zandi’s analysis. Despite the weakness in growth last month, private employment still managed to rise by nearly 2.0% for the year through September. That’s at the low end of the year-over-year figures since May, but it’s moderately above the range for the 12 months through this past April. In short, the latest trend update for private employment growth reflects a healthy advance.
If last month’s weakness is a one-off event, next month’s employment data will perk up and keep the one-year change at or above the current pace. In turn, that’s a clue for thinking that the near-term outlook for the labor market remains upbeat.
But first, Friday’s official data on September employment from Washington awaits. Econoday.com’s consensus forecast sees a sharp slowdown on this front as well. Private employment is expected to post a gain of 117,000 for last month, down from a 165,000 rise in August. The implied forecast for the year-over-year trend is set to dip to just above 1.6%, a six-year low.
The bottom line: the Labor Department’s data is expected to reflect more weakness for September compared with ADP’s estimate. But if that’s a function of the temporary blowback from hurricanes, the projected dip in Friday’s data shouldn’t be considered a warning sign for the economy.
Then again, the real test is a month away, when the October employment arrives. If the weather-related analysis is correct, next month’s profile of the labor market will more or less confirm that September’s stumble was an anomaly. That’s a reasonable assumption… until or if incoming data suggests otherwise.