Critical moment "in the dark"! "Little Non-Farm" unexpectedly sees the largest drop in two and a half years, government data also "stalls"

According to the Zhitong Finance APP, in September, the number of jobs in the U.S. private sector experienced the largest decline in two and a half years, further indicating that the labor market is continuing to weaken, while the data supply issues caused by the U.S. government shutdown have exacerbated the situation.

ADP reported on Wednesday that, after seasonal adjustment, businesses reduced 32,000 jobs in September, marking the largest monthly decline since March 2023, in contrast to economists' expectations of an increase of 45,000.

In addition to the decline in September's employment numbers, the August employment data was also revised down from an initially reported increase of 54,000 to a decrease of 3,000.

This report comes at a time when the U.S. is facing a funding deadlock, which has led to the first government shutdown since late 2018 to early 2019. If an agreement cannot be reached in the next two days, the U.S. Bureau of Labor Statistics' September non-farm payroll report will not be released as scheduled, and the Labor Department's weekly initial jobless claims data, originally set to be released on Thursday, will also be postponed. The last time the Bureau of Labor Statistics delayed the release of the non-farm payroll report was in 2013.

Federal Reserve officials heavily rely on employment data when formulating interest rate policies. The next monetary policy meeting of the Federal Reserve will be held from October 28 to 29, which means no new employment reports will be released before the meeting.

Given that the market generally expects the Federal Reserve to lower the key lending rate by another 25 basis points, the importance of the employment data released by ADP has further increased.

From an industry distribution perspective, multiple sectors saw job reductions in September, but the education and healthcare services sectors added 33,000 jobs due to the start of the school year and ongoing recruitment in the medical field, somewhat offsetting the overall downward trend.

Specifically, as a key industry reflecting consumer demand, the leisure and hospitality sector reduced 19,000 jobs due to the end of the vacation season; other service industries decreased by 16,000 jobs; professional and business services reduced 13,000 jobs; trade, transportation, and utilities decreased by 7,000 jobs; and construction reduced by 5,000 jobs.

From a broader classification, service providers reduced 28,000 jobs, while goods-producing industries decreased by 3,000 jobs. Small businesses with fewer than 50 employees reduced 40,000 jobs, while large enterprises with 500 or more employees added 33,000 jobs.

ADP Chief Economist Nela Richardson stated, "Although the U.S. economy showed strong growth in the second quarter, the employment data released this month further confirms the trend we have observed in the labor market—U.S. employers are being cautious in hiring." According to the Atlanta Fed's GDPNow data tracking tool, the U.S. economy grew at a rate of 3.8% in the second quarter, and the growth rate for the third quarter is expected to reach 3.9%.

However, despite the current unemployment rate remaining relatively low at 4.3%, concerns about the state of the labor market are still intensifying Boston Federal Reserve President Collins pointed out on Tuesday: "In my baseline expectation, the labor market will not further weaken significantly, but there are still risks. Specifically, I note that the risk of labor demand being significantly lower than labor supply has increased, which could lead to a significant and undesirable rise in the unemployment rate."

Previously, the market's general expectation for the Labor Department's September non-farm payroll report was an addition of 51,000 jobs. It is important to note that, unlike the ADP report, the Labor Department's non-farm employment data includes government sector jobs.

The ADP report also showed that although hiring slowed in September, wages grew by 4.5% year-on-year, remaining roughly the same as in August. However, the wage growth rate for job switchers fell to 6.6%, down 0.5 percentage points from August.

Additionally, it is worth noting that the unexpected decline in U.S. corporate employment in September is at least partly related to data analysis issues. ADP stated that it has recalibrated past employment statistics based on the benchmark revision data released by the Labor Department in September, which led to a significant downward revision of employment data compared to before the recalibration.

ADP stated in a release: "In the latest published Quarterly Census of Employment and Wages (QCEW) data, the number of missing or edited hidden values in certain industry categories was higher than usual. This necessitated a more coarse segmentation for this benchmark calculation than in previous years."

ADP used the QCEW data for the entire year of 2024 to assess the distribution of employment positions across various industries, states, and different sizes of businesses in the U.S. This dataset is based on state unemployment insurance tax records and covers nearly all employment positions in the United States.

Furthermore, QCEW data is also used to annually calibrate the overall employment data released by the government. Preliminary estimates released last month indicated that as of March this year, after this adjustment, the annual employment number would be unprecedentedly reduced by 911,000.

However, Richardson added in an interview: "The overall trend has not changed, and the characteristics of slowing hiring momentum remain evident."