US private sector adds more jobs than expected in October

Private sector employment in the US grew more than expected in October, according to the latest data from the ADP.

Employment rose by 571,000 from September, coming in ahead of expectations for a 400,000 increase. Meanwhile, the September total of jobs added was revised from 568,000 to 523,000.

Nela Richardson, chief economist at ADP, said: "The labour market showed renewed momentum last month, with a jump from the third quarter average of 385,000 monthly jobs added, marking nearly 5 million job gains this year.

"Service sector providers led the increase and the goods sector gains were broad based, reporting the strongest reading of the year. Large companies fueled the stronger recovery in October, marking the second straight month of impressive growth."

Mark Zandi, chief economist of Moody’s Analytics, said: "The job market is revving back up as the Delta wave of the pandemic winds down. Job gains are accelerating across all industries, and especially among large companies. As long as the pandemic remains contained, more big job gains are likely in coming months."

Small businesses with fewer than 50 employees added 115,000 jobs, while medium businesses with between 50 and 499 employees added 114,000. Large businesses with more than 500 employees created a further 342,000 jobs.

The services sector added 458,000 jobs, while the goods-producing sector created 113,000.

Michael Pearce, senior US economist at Capital Economics, said the larger-than-expected rise in private payrolls suggests some upside risk to CE’s forecast that the official figures out on Friday will show a more muted 300,000 gain in non-farm payrolls.

"The increase in payrolls on the ADP measure was similar to the downwardly-revised 523,000 gain in September and included a 185,000 rise in leisure and hospitality payrolls, as the Delta wave of infections eased," he said.

"Furthermore, there were signs of broad-based strength in hiring across the services sector, with professional and business payrolls rising by 88,000, education and health up by 56,000, and trade, transportation and utilities payrolls increasing by 78,000. Meanwhile, despite materials shortages holding back production, manufacturing payrolls rose by 53,000 and construction employment was up by 54,000.

"The ADP report provides only a rough guide to the official figures, with the average absolute difference between the two over the past year has been 260,000. The ADP report also only captures private payrolls, so it tells us little about what happened to public education payrolls in October following the more than 150,000 decline in September in seasonally adjusted terms.

"Even so, the data do suggest some upside risk to our below-consensus forecast that the official figures will show a 300,000 gain in non-farm payrolls. Either way, the big story in the labour market is the worsening shortages that are pushing up wage growth. All the evidence suggests those shortages are worsening thanks to the imposition of vaccine mandates, with 9,000 New York City workers (around 2.5% of the total) being put on unpaid leave this week."