Over the past two and a half years, there’s been an unexpected decline in private pay. This comes just as the Federal Reserve is about to decide on interest rates later this month, coinciding with potential government shutdowns that could disrupt key economic data releases.
The ADP report published Wednesday indicated that U.S. business wages dropped by 32,000 in September, marking the most significant decrease in private pay growth since March 2023. This follows a revised loss of 3,000 in August, a decline from an earlier estimate of 54,000.
This drop in private pay might represent one of the last insights into the labor market for a while, especially given the budget issues in Washington D.C. that have triggered the first government shutdown since 2018, during President Trump’s initial term.
If the shutdown persists, the Bureau of Labor Statistics will likely not publish its non-farm pay report this Friday, which many prefer for its comprehensiveness compared to the ADP figures. Additionally, weekly unemployment claims are also expected to remain undisclosed.
Unlike the ADP report—which includes government employment—the BLS salary report hasn’t seen delays like this since 2013.
Bill Adams, chief economist at Comerica Bank, noted that the ADP estimates usually serve as a secondary indicator for macroeconomic trends and offer a preview of government employment growth reports. However, he mentioned that the Fed and financial markets may start to value private pay releases more, especially if the data surpasses expectations, which could influence further interest rate cuts this month.
Last month, the Fed cut rates by a quarter point for the first time since December 2024, as Chairman Jerome Powell highlighted concerns about a softening labor market overshadowing inflation worries.
While the U.S. economy had a robust growth rate of 3.8% in the second quarter, anxiety regarding the labor market persists, despite relatively low unemployment rates.
Employers appear hesitant to expand hiring, caught in economic uncertainty and trade tensions linked to Trump’s tariffs. Nella Richardson, chief economist at ADP, commented that despite strong growth, employers are being cautious about adding to their workforce.
Interestingly, although September saw a job loss, there was a gain of 33,000 in education and health services, driven by school reopenings and strong healthcare employment trends. However, the leisure and hospitality sector suffered a decline of 19,000 jobs as the critical holiday season wound down.
Other service categories fell by 16,000, while the professional and business services sector saw a reduction of 13,000. The trade, transportation, and utilities sectors lost 7,000 jobs, and construction dropped by 5,000.
Overall data reflected a decrease of 28,000 in service providers, while goods producers lost 3,000 jobs. Companies with fewer than 50 employees let go of 40,000 individuals, whereas those with over 500 employees added 33,000 jobs.
The ADP data, which encompasses salaries from over 26 million private sector workers, indicates a continued slowdown in wage growth. Those switching jobs experienced a 6.6% wage boost, while those staying in their positions noted a 4.5% increase, with minimal changes overall.
In other developments, the BLS faced accusations from Trump regarding alleged manipulation of job data, following the abrupt firing of division chief Erica Mantelfer in August after a series of disappointing figures. Recently, the White House withdrew the nomination of economist Eji Antoni, who was tied to the Heritage Foundation, indicating that Trump plans to announce a new candidate soon.
