ADP said a net 239k private sector jobs were added in October, above the estimate of 185k and vs 192k in September which was revised down by 16k. All of the jobs came from the service sector as manufacturing subtracted 20k jobs, only partly offset by natural resources/mining and construction which are all in the goods sector. Leisure and hospitality was really one of the sole sources of notable job growth, contributing 210k. The trade/transportation/utilities group added 84k while job losses in services were seen in Information (tech), Financial Activities, Professional/business services, and education/health services.
With respect to business size, companies with 1-19 employees and those with 50-249 employees were the only net hiring cohort. Others shed workers with those more than 500 employees in particular losing 4k people. On the wage side, which ADP is now reporting, saw ‘Job Stayers’ seeing a 7.7% median pay raise y/o/y, driven by an 11.2% raise for leisure/hospitality workers. For those ‘Job Changers’ they saw a robust 15.2% y/o/y wage gain, though down from 15.7% in September.
Bottom line, the job increase was better than expected but the breadth was pretty weak. The chief economist of the ADP said “Good producers, which are sensitive to interest rates, are pulling back, and job changers are commanding smaller pay gains. While we’re seeing early signs of Fed-driven demand destruction, it’s affecting only certain sectors of the labor market.” This bifurcation of the labor market is what we’ve heard anecdotally where tech companies, who over hired in the last few years, are trimming staff, while airlines, restaurants and hotels can’t find enough people.
US Treasuries are up a touch and didn’t move much in response as we know ADP only sometimes correlates with the BLS (but hopefully more so now with its new calculation method). Friday’s private sector estimate is 200k. The dollar is weaker but has been all morning. Again, with respect to the Fed and its December rate decision, they have two more BLS reports to see before they enter that room.
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.